The investments in Romania’s economy edged up modestly by 0.8% year-on-year in 2018, in comparable prices, but a more detailed evaluation of the data indicates a dynamic investment activity in the local companies.

The overall investment figure shows a steep deceleration from the 6.4% year-on-year advance in 2017.

Subdued investments would occur toward the end of the expansionary stage of the business cycle (GDP growth contracted to 4.1% in 2018 from 7.1% in 2017) with a pro-cyclical impact.

On the upside, however, the investments in productive equipment and machinery increased in 2018 much faster than the average: by 15.6% year-on-year, marking a substantial acceleration from the 3.9% year-on-year advance in 2017. This invalidates the pro-cyclical impact of the investments, suggested by the overall investment figure. The rising labor cost has indeed forced companies to invest in technology to compensate for the lack of workforce and rising wages.

The investments in buildings contracted by 9.7% in 2018, further supporting the scenario of more modern production equipment being deployed in existing production facilities.

editor@romania-insider.com

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