The discussions about healthcare reform in Romania at the beginning of 2012 sparked nationwide protests and the eventual resignation of former prime minister Emil Boc and his government. During the demonstrations it quickly became clear that the main cause of discontent was not the controversial healthcare reform, but a general disillusionment regarding the country’s economic outlook. To make matters worse, the cabinet formed by Mihai Ungureanu in February collapsed only two months later, also on the back of the anti-austerity debate.

Romania may have its fair share of problems, and austerity measures introduced as part of an International Monetary Fund-backed aid package invariably influence the life of many Romanians, but at the same time the country is recovering from the crisis better than many of its eastern European neighbours. In 2011, Romanian GDP grew by 2.5% and the forecast for 2012 is at 2%, while inflation is at a historic low.

Return to growth

The growth of the country’s economy may be a far cry from when it was recording 5% GDP growth on average between 2001 and 2008, but it is a world away from 2009 and 2010, when Romania was suffering one of the toughest crises in the EU. “Things are far from being perfect, but they are not as bad as commonly perceived by Romanians,” says Dr Adrian Severin, a Romanian member of the European parliament.

The country's economy seems to be growing slowly, but many Romanians are still some way from recovering both from the sharp economic contraction in 2009 and 2010 and austerity measures introduced afterwards. “The economic boom around the time when Romania joined the EU [in 2007] was artificially inflated. Now, the economy is growing slower, but at a much healthier pace,” says Lucian Anghel, chief economist of Banca Comerciala Romana and chairman of the Bucharest Stock Exchange.

Karim Kheirat, the Romania country manager for rating agency ICAP Group, adds that immediately before the crisis, consumer credit was easily accessible and foreign investors were keen to quickly acquire market share without assessing the situation sufficiently. “By borrowing, Romanians bought into the European dream between 2004 and 2008. After the crisis, the market had come back to its normal state, but households had to pay the bill for that,” he says, while adding that the views he expresses are his own and not of the company he represents.

“Lack of certainty still affects the consumer behaviour [and] the situation in the banking sector is not helping,” adds Diana Florescu, financial markets editor at the Money Channel, Romania's premier business TV broadcaster.

Encouraging investors

In 2011 Romania was the biggest recipient of FDI in central and eastern Europe. According to fDiMarkets data, while the number of projects in Germany, Russia and Poland contracted by 22%, 16% and 13%, respectively, the number of greenfield investments in Romania rose by an impressive 20%. In the past year the country has received more than 7% of all projects in the renewable energy sector, and at the investment conference organised by the Shared Services and Outsourcing Network in March, Romania was widely considered as the 'next big thing' for back-office operations.

However, at the very same conference, investors unofficially admitted that the negativity of the country's residents is often offputting. Could such pessimism hurt the image of Romania as an attractive place for the investments? Mr Severin believes so, as the talk of gloom leads to self-fulfilling prophecies. “We express our discontent loud and clear if something goes wrong, we treat it as a confirmation of our previous assumptions. Romanians create a vicious circle that is not good for the economy,” he says.

For the time being, access to the huge pool of relatively cheap, educated workforce and big domestic market serve as the main drivers. Yet in times when other countries are increasing efforts to promote their attractiveness, Romanian pessimism may backfire badly.