Jan. 24, 2010 -
PRLog -- In BMI's Business Environment Ratings, Romania ranks joint tenth, alongside its fellow 2007 European Union (EU) entrant Bulgaria, out of the 14 main markets surveyed in the CEE region. The operating environment for foreign companies has been worsened by financial considerations, as well as a high degree of saturation in certain markets. For example, in late January 2009, prominent European mass grocery retail (MGR) operator Spar International locked the doors on its store in Targu-Mures, amid speculation that more of its outlets will close later in the year. Similarly, G'Market, run by Turkish group Anchor, closed a supermarket in Bacau, although discount stores are likely to reap the benefits of the current economic climate. Moreover, the retailers that are able to survive the difficult trading conditions in 2009 and 2010 should be well placed to benefit from the sector's recovery once consumer confidence begins to return. In the meantime, the country's foods and drinks market are also facing increased challenges. In December 2008, according to Fresh Plaza, a partner at leading Romanian marketing firm Daedalus Millward Brown stated that Romanian consumer behaviour is expected to change direction in the course of 2009, with consumption frequency falling and customers seeking cheaper brands. Some companies are already feeling the pinch, with the owner of the RTC Group indicating that he would close down his wine retail company Depozitul de Vinur, following reports that he could not sell the company. The operations, which generated over EUR1mn (US$1.3mn) in 2008 turnover, are already winding down, with the owner also selling or folding a number of his other interests. Nevertheless, the activities of other players indicate a longer-term potential of the populous Romanian market, Such developments include the January 2009 acquisition of a majority stake in local brewer Bere Azuga by SABMiller's Romanian subsidiary Ursus Breweries and the recent announcement by Serbian juice maker Nectar that it will enter the Romanian market, with the financial backing of the European Bank for Reconstruction and Development (EBRD). In the MGR sector, French retail giant Auchan acquired the remaining 51% share of its Romania-based retail operator MGV Distri-Hiper, shortly after the inauguration of its sixth hypermarket in the country, while Mega Image, a subsidiary of Belgian retailer Delhaize, announced plans to open eight new stores in 2009. In the meantime, while the Romanian government's austerity draft budget, which is expected to result in a significant reduction in the country's fiscal deficit for 2009, will also increase the risk of social unrest, some provisions provide a stimulus to economic activities in the country. For example, from 2010, companies reinvesting profits on modernization will be exempt from paying a 16% tax on the amount used for the upgrade, while the government has earmarked EUR10bn (US$12.95bn)
for infrastructure investment. The latter will be topped by EU structural funds, potentially improving access to MGRs and therefore boosting product exposure opportunities. However, we still expect Romanian growth to slow sharply in 2009 to 3.1%, held back by tightening global credit conditions, resultant slowdown in capital inflows, weak domestic and external demand and heightened investor aversion towards Romanian assets.
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