Retail: the shooting star Romania

Before the big economic crisis in 2008, Romania, alongside Poland, was the favorite market for the retail and shopping center industry. The annual GDP growth reached 8%, and the purchasing power of the population rose almost as fast. Yet then the crash came: in 2009, the economic output fell by 7%. Consumers could not consume as much as before, and investors were frightened by the situation. Since then, there has been little trade development going on. The desire to buy was low, especially, since households were still in debt. The shopping center industry appeared in the news headlines, only if some recently completed centers had to be closed again.
At the moment, however, the market is worth considering again. Romania achieved the biggest GDP boom among other euro zone countries, with an increase of 5,9% this year. According to the latest data, Romania´s economy is expected to grow by 5% in 2016.
The positive development seems to indicate that the Romanian market is gradually catching up with more mature markets. The reduction of the turnover tax from 24% to 20% starting from 2016, an increase of 19% in the minimum wage, as well as low inflation, have a positive impact on the retail sector. Consumer prices are expected to remain mostly stable, and available margins will be used for sales promotion measures.
Romania has also an attractive sales area per capita indicator, which marks the maturity of the market and competition within it. Compared to saturated markets, Romanian market offers a strong development potential, provided that the purchasing power of the population continues to grow. To compare, the retail density in Germany amount to approximately 1.5 m² sales area per inhabitant, whereas in Romania it is only 0.7 m².
In the area of shopping center development, investors are reacting to the changes, and half a dozen projects are already ready to be launched. The capital remains the most attractive location, but secondary cities in the west of the country are also important. The major growth driver is private consumption, which explains the increase in investment. Low costs of financing, increased investor confidence and low interest rates for loans represent additional favorable stimuli. The company Plaza Center, with its three shopping center projects planned for 2017, can be considered the main developer. In cooperation with the Romanian government, the company has also planned an opening of a new retail park next year. The newly renovated building of Casa Radio in Bucharest, with a surface area of 92.000 m², will host offices, commercial spaces, as well as a hotel. The AFI Europe Group is also developing a shopping center in the north-west of the capital, which will have more than 100 international fashion brands to offer. This successful Romanian company has further plans for 2017: - a shopping center in Bucharest and a retail park in Arad located in the west of the country.
It seems that politics and economy have responded to the country’s structural problems. Thus, public discussions about presenting Romania as a competitive and sustainable economy have paid off. Policy makers have firmly decided to implement European economic governance guidelines, including those designed for the Europe 2020 strategy. Improvements of financial and budgetary responsibility, investment in research and development, development of the capital market, and development of real economic convergence are among the issues to be addressed.
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