Overview of the Agricultural Sector in Romania

Potential of the agricultural sector in Romania

The agricultural sector in Romania has a very high potential. The country total production value increased by 12.5% in 2017 compared to the previous year – equal to 78.5 billion RON, or 17.2 billion EUR, according to data analyses by the INS (National Statistics Institute). The country has the sixth surface level dedicated to agriculture in the EU - 13.9 million hectare - after France, Spain, UK, Germany and Poland (PwC Romania). The Agricultural sector in Romania engages around 30% of the workforce of the country and it contributes to 7.9% of the total GDP of the country, a very high level considering that the European average covers only 1.9%. The majority of the land is dedicated to cereal cropping (23.6%) and it covers 2/3 of the total agricultural land. Grain production represented over a third (34.8%) of the whole crop production. Sunflower seed has also an extensive exploitation, Romania indeed is positioned as one of the top producer in the EU. Vegetables, with a particular large production of cabbages, onions, potatoes, green peppers and tomatoes are also cultivated around the cities of Timișoara, Arad, Craiova, Galați, Brăila and Bucharest. The agricultural sector in Romania offers a relevant wine industry too. Thanks to its large export, Romania, indeed, can be considered one of the most important wine-producing country of Europe. The most famous vineyards are located in the area of Odobesti, Panciu, and Nicoresti.

Challenges of the agricultural sector in Romania

The agricultural sector in Romania has past various historical period and the last relevant changed was defined in 2014 when a new law has completely liberalized the acquisition of agricultural lands to foreign investors (law n. 17/2014). This new law has accelerated the innovation and mechanisation process of the agricultural sector in Romania, but the general productivity remains still too low. A side-effect of this new law is the so-called “land grabbing” which has created a high concentration of power and a monopoly in the sector. According to a research developed by the Institute TNI (www.tni.org/en) the 0.4% of the Romanian agricultural companies own more than 48% of the lands. In addition to this, there are other main problems to solve: in Romania there is a spread tax evasion, there is lack of training among farmers and the low level of capitalisation of the sector.

Main Agricultural Sectorial Fairs in Romania

INDAGRA in Bucharest - 30 October - 03 November 2019 - (https://www.indagra.ro/en/ )

AGROMALIM in Iasi - to be defined - (http://www.agri-events.ro/ - http://www.ccia-arad.ro/agromalim/ )

Happy Birthday EURO – Thanks to you Italian People Lost 74.000 euro

The German Research Center CEP - Center for European Policy of Freiburg (www.cep.eu) - has recently published an interesting analysis on the 20 years of euro history entitled “20 Years of the Euro: Winners and Losers”.

Since we have adopted the new European currency, Italians has lost 73,605 euro, while Germans has won 23,116 euro. Thus, Germany gain the gold medal, while Italy got the last place of the race. This are the results of CEP study which has compared eight Eurozone-countries (Germany, Netherland, Greece, Spain, Belgium, Portugal, France, and Italy) to evaluate the real impact of Euro in the national European economies. Thus, the study, focusing on the per-capita GDP of each country, has analyzed the trend of this index without the euro, under the assumption that the countries could have kept the control on their economic policy.

In 2017, for instance, German GDP rose by 280 billion euros and GDP per capita by 3.390. Italy has lost more than everyone. Without the euro, the CEP scholars calculate, the GDP of Rome would have been higher than 530 billion euros, which corresponds to 8,756 euros per capita. In France too, the euro led to significant economic losses of € 374 billion, corresponding to € 5,570 per capita.

Greece and Italy, in particular, are going through a hard difficulty because of the fact that they are not able to devalue their currency anymore. This has led that their products are not so competitive in the international market. As the study states, “in the decades prior to introduction of the euro, Italy regularly devalued its currency for this purpose. After the introduction of the euro, that was no longer possible. Instead, structu creasing losses in prosperity”. The figures below are showing the opposite negative and positive trend of Italian and Spanish per-capita GDP due to their more or less ability to renovate and change their economic policy.

 

Looking at the CEP study from a political perspective we can say also that this incapacity of Italy to find a way to become competitive within the Eurozone has produced and raised the skepticism on the European Union among Italians which will risk to impact irrevocably the next European Election results on May 2019.

Italy

Spain

The positive trends of industrial and manufacturing sectors in Bulgaria

For years, the economy of Bulgaria has undergone a lasting restructuring process whereby some industries are growing rapidly and are increasing their share in the economy, while others are shrinking and reducing their burdens. Industry is among the growing branches of the Bulgarian economy, which has developed at a good pace since 2000 and increases its gross benefit, excluding the crisis period (2009-2010). Its share in the economy has also risen since the millennium - from 21% in gross value added in 2000, the industry in 2017 already accounts for a 24% share.

In addition to industrial goods, Bulgaria's economy also produces more and more services, which also often remain unnoticed. The ICT sector, the outsourcing of business services and the financial sector are among the increasingly important sectors of the economy, if we judge from their contribution to it. The ICT sector already has a share of 5.5% in gross value added (compared with 3.2% in 2000), outsourcing - 6,1%, and Finance and Insurance - 7.5%. At the same time, the sector that has been "losing ground" most visible in the local economy for the past 17 years is agriculture - despite the huge subsidies for it under the Common Agricultural Policy and national supplementary payments. In public services (administration, health, education, etc.) and real estate there is also a drop in shares, but much less.

In addition, here is what goods are being produced more and more in Bulgaria. The industry's most prominent developments since 2000 include metal products, electrical equipment, furniture, rubber and plastics, car parts, machinery, equipment and weapons, computer and communication equipment, wheels, paper and board.

In the above-mentioned processes, the increase of production from the beginning of 2000 to January 2018 is far above the average for the manufacturing industry and in some cases it reaches 3-4 times (see the information below). The reason for expansion is usually high competition in the foreign markets and significant export output, which is also confirmed by export data.

Change in Manufacturing Production (January 2018 vs. January 2000),%

Processing industry:                                                                                                              125.7 %

Manufacture of food products:                                                                                            112.8%

Manufacture of beverages:                                                                                                   10.6%

Manufacture of tobacco products                                                                                       -54.8%

Manufacture of textiles and textile products, except apparel                                         48.2%

Production of clothing                                                                                                           58.0%

Leather processing, Manufacture of footwear and other articles of leather                8.4%

Manufacture of wood and of products of wood, except furniture                                 75.1%

Manufacture of paper, paperboard and other paper products                                        219.2%

Printing and reproduction of recorded media                                                                   72.8%

Manufacture of chemical products                                                                                     65.8%

Manufacture of medical substances and products                                                         18.0%

Manufacture of rubber and plastic products                                                                     399.5%

Manufacture of other non - metallic mineral products                                                    139.6%

Manufacture of basic metals                                                                                               156.0%

Manufacture of fabricated metal products, except

machinery and equipment                                                                                                    370.7%

Manufacture of computer and communication equipment,

electronic and optical products                                                                                           252.0%

Manufacture of electrical equipment                                                                                 494.6%

Manufacture of machinery and equipment, general and special                                  284.8%

Manufacture of motor vehicles, trailers and semi - trailers                                          385.5%

Manufacture of motor vehicles and not motor vehicles                                                278.9%

Furniture manufacturing                                                                                                      398.2%

Production not elsewhere classified                                                                                  349.2%

Machinery and equipment maintenance and installation                                              88.7%

Consumer durables                                                                                                              513.1%

Products for intermediate consumption                                                                           122.2%

Consumer non - durable products                                                                                     60.6%

Energy products                                                                                                                     10.0%

Source: NSI, calendar-adjusted data

The only sector with a decline in production since 2000 has been tobacco products - because of health policies, the rise in prices due to the increase in excise duties, the illegal market and, in general, the shrinking consumption of such products throughout Europe and the developed countries. Among sub-sectors with relatively low performance (i.e. growth below the average for the whole sector) are leather, textiles, shoes, wood, beverages, food, etc. All of them traditionally belong to goods with a relatively low processing rate and relatively low benefit respectively. By contrast, most of the sectors that have grown sharply since 2000 are those adopted for sectors with high benefit, such as machinery, electrical equipment, computer and communication equipment, car components, bicycles, and more. They have increased their share of exports more than double since 2000 - from 11 to nearly 26%.

It is remarkable that all investment goods subsectors increase their share in the country's exports without exception. This restructuring towards commodities with higher benefit occurs at the expense of all other major product groups - energy resources, consumer goods, raw materials and materials. This does not mean that their exports are declining, on the contrary - its growth is relatively slower than that of investment goods. However, it is important to note that in the three groups mentioned above, whose share of total exports shrinks, and there are products that enjoy increasing weight in external sales. For example, in consumer goods, the proportion of food is rising; the same applies to feedstock, which also have a significantly higher share in 2017.

Overall, GDP, industrial output and exports data show the following:

1 / Bulgarian industry has been developing well since 2000 and has increased its weight in the economy, largely due to the expansion of the manufacturing industry;

2) In the manufacturing industry there is a steady trend of restructuring towards a higher share of high added value sub-sectors at the expense of those with a lower processing rate;

3) This restructuring process is mainly dictated by foreign markets and reflects the competitiveness of Bulgarian producers of commodities with relatively high benefit.

 

Economy of bulgaria

For years, the economy of Bulgaria has undergone a lasting restructuring process whereby some industries are growing rapidly and are increasing their share in the economy, while others are shrinking and reducing their burdens. Among the growing industries is the industry, which has developed at a good pace since 2000 and increases its gross benefit, excluding the crisis period (2009-2010. Its share in the economy has also risen since the millennium – from 21% in gross value added in 2000, the industry in 2017 already accounts for a 24% share.

In addition to industrial goods, Bulgaria’s economy also produces more and more services, which also often remain unnoticed. The ICT sector, the outsourcing of business services and the financial sector are among the increasingly important sectors of the economy, if we judge from their contribution to it. The ICT sector already has a share of 5.5% in gross value added (compared with 3.2% in 2000), outsourcing – 6,1%, and Finance and Insurance – 7.5%. At the same time, the sector that has been “losing ground” most visible in the local economy for the past 17 years is agriculture – despite the huge subsidies for it under the Common Agricultural Policy and national supplementary payments. In public services (administration, health, education, etc.) and real estate there is also a drop in shares, but much less.

In addition, here is what goods are being produced more and more in Bulgaria. The industry’s most prominent developments since 2000 include metal products, electrical equipment, furniture, rubber and plastics, car parts, machinery, equipment and weapons, computer and communication equipment, wheels, paper and board.

In the above-mentioned processes, the increase of production from the beginning of 2000 to January 2018 is far above the average for the manufacturing industry and in some cases it reaches 3-4 times (see the information below). The reason for expansion is usually high competition in the foreign markets and significant export output, which is also confirmed by export data.

Change in Manufacturing Production (January 2018 vs. January 2000),%

Processing industry – 125.7 %

Manufacture of food products – 112.8%

Manufacture of beverages – 10.6

Manufacture of tobacco products – 54.8

Manufacture of textiles and textile products, except apparel – 48.2%

Production of clothing – 58.0%

Leather processing, Manufacture of footwear and other articles of leather – 8.4%

Manufacture of wood and of products of wood, except furniture – 75.1%

Manufacture of paper, paperboard and other products of paper and paperboard – 219.2%

Printing and reproduction of recorded media 72.8%

Manufacture of chemical products 65.8%

Manufacture of medical substances and products – 18.0%

Manufacture of rubber and plastic products – 399.5%

Manufacture of other non – metallic mineral products -139.6%

Manufacture of basic metals – 156.0%

Manufacture of fabricated metal products, except machinery and equipment – 370.7%

Manufacture of computer and communication equipment, electronic and optical products – 252.0%

Manufacture of electrical equipment – 494.6%

Manufacture of machinery and equipment, general and special – 284.8%

Manufacture of motor vehicles, trailers and semi – trailers – 385.5%

Manufacture of motor vehicles and not motor vehicles – 278.9%

Furniture manufacturing – 398.2%

Production not elsewhere classified – 349.2%

Machinery and equipment maintenance and installation – 88.7%

Consumer durables – 513.1%

Products for intermediate consumption – 122.2%

Consumer non – durable products – 60.6%

Energy products – 10.0%

Source: NSI, calendar-adjusted data

The only sector with a decline in production since 2000 has been tobacco products – because of health policies, the rise in prices due to the increase in excise duties, the illegal market and, in general, the shrinking consumption of such products throughout Europe and the developed countries. Among sub-sectors with relatively low performance (ie growth below the average for the whole sector) are leather, textiles, shoes, wood, beverages, food, etc. All of them traditionally belong to goods with a relatively low processing rate and relatively low benefit respectively. By contrast, most of the sectors that have grown sharply since 2000 are those adopted for sectors with high benefit, such as machinery, electrical equipment, computer and communication equipment, car components, bicycles, and more.

This restructuring of production to sectors with higher benefit is also seen in foreign trade data, and in particular in exports. It is clear that the big “winner” of the restructuring of the economy, industry and exports is precisely the investment goods that belong to the goods with high benefit. They have increased their share of exports more than double since 2000 – from 11 to nearly 26%. These include machines, appliances and machines, electrical machines, vehicles, parts and other investment goods. It is remarkable that all investment goods subsectors increase their share in the country’s exports without exception. This restructuring towards commodities with higher benefit occurs at the expense of all other major product groups – energy resources, consumer goods, raw materials and materials. This does not mean that their exports are declining, on the contrary – its growth is relatively slower than that of investment goods.

However, it is important to note that in the three groups mentioned above, whose share of total exports shrinks, and there are products that enjoy increasing weight in external sales. For example, in consumer goods, the proportion of food is rising; the same applies to feedstock, which also have a significantly higher share in 2017.

The future of the European Union in the hands of Romania

The Presidency of the European Council is now in the hands of Romania. For the first time in the history, from January to June 2019, Romania will lead the semester of the European Council trying to limit the consequences of the Brexit process which is foreseen to be concluded in March 2019. The challenge will be even more complicated considering that yesterday the UK Parliament rejects the Brexit May’s agreement developed in the last months with the European Union. Viorica Dancila, the First Minister of Romania declared that the main goal of the Romanian Presidency will be to keep united the European Union. Indeed, Brexit without any agreement could strongly impact our life and economy. If this happens European citizens leaving in UK (and vice-versa), businesses and public authorities would have to act instantaneously to changes as result of leaving the European Union. Thus, the goal of Romania is very important and it will be focus on the results of the upcoming European Parliamentary election which for various experts will be characterized by a key political choice between Sovereignists and Europeanists. Shortly before the election, on the 9th of May – Europe Day – Romania will host also an important European Summit in Sibiu with all the European Leaders to discuss and define a new path for the European Union.

The main priorities of the Romanian Presidency of the EU Council are the following:

“Europe of convergence” – focused on cohesion policy and the competiveness European industrial policy. It aims to stimulate entrepreneurship, digitalization and innovation among European industries.

“A safer Europe” – focused on the new security challenges and supporting new bilateral cooperation initiatives with EU neighbouring countries.

“Europe, as a stronger global actor” – focused on the image and the global role of the EU

“Europe of common values” – focused on the main common values of the EU. It aims to promote and consolidate solidarity, freedom, democracy and respect of human dignity, inside and outside European borders.

Read more https://www.romania2019.eu/

Italian trade: Challenges and Opportunities of a “NO DEAL” between UK and European Union

UK is a relevant market for the Italian international trade. Indeed, in 2017 UK was the fifth trade partner of Italy - after Germany, France, USA and Spain - and the second in the surplus ranking for Italy after the USA. According to the report of the Italian Trade Agency (ICE - Istituto Commercio Estero), in 2017 the trade between UK and Italy was 34,5 billion euro compared to 33,7 in 2016 (+2.4%). In particular, the Italian exports amounted to 23.1 billion of euro (+3.2%), while the imports from UK amounted to 11.4 billion euro, 1.3% more compared to 2016. The balance is positive for Italy for 11,7 billion of euro, up 4.5% compared to 2016 (see the list below related to the most relevant items of the Italian-UK trade).

The vote of the British Parliament of the 15th of January 2019 which rejected the May’s Deal has shown a very delicate moment for the Italian and European markers. A so-called “NO DEAL” between UK and the European Union could create uncertainty and fear among the markets bringing a potential domino-effect where companies could decide instinctively to leave the British market (and vice versa). Indeed, a “NO DEAL” could negatively impact both the multinational corporations - which have chosen to establish their office in London - and the SMEs - which are exporting and importing from the UK market. Thus, in case of a “NO DEAL” there is the possibility to fall back into a scenario in which, at least for a certain period and for specific categories of products, the WTO agreements will rule the trade with the British economy.

In negative terms, it should also be considered that the UK subsidiaries in Italy have a relevant weight, indeed they assure an annual turnover of about 35 billion euro (equal to 9.5% of the total turnover of multinational companies in Italy) and with 85 thousand employees.

Despite the negative effects, a “NO DEAL” scenario could bring in Italy and the EU countries also interesting opportunities. Indeed, the UK's exit from the EU could trigger at least partial reallocation of FDIs and attract multinational companies in other EU countries. The effects would be produced in the medium term and their real impact are difficult to be quantify in advance. A 2016 study estimates a decrease of FDI in the United Kingdom by 22% in ten years. This amount would correspond to € 282 billion of foreign capital that could flow into EU countries. The attraction of these foreign investments by individual countries will depend on their structural characteristics. Opportunities to attract investments could also arise for Italy. On the basis of the degree of similarity between the sectorial distributions of incoming FDI - with the important exception of financial services that have a leading role for the UK economy - it emerges that the Italian market could have a good chance, because its sectors with a greater presence of foreign capital (manufacturing, wholesale, telecommunications and IT services) are the same that occupy the first positions in the distribution of FDI in the UK economy.

In 2017 the main items of Italian exports to the UK were: machinery (2.7 billion euros); motor vehicles (€ 1.6 billion); medicines and pharmaceuticals (€ 1.3 billion); clothing (1.2 billion euros); drinks (1 billion euros); components for cars (902 million euro); furniture (€ 902 million); footwear (605 million euros).

On the side of imports from Great Britain, the most relevant items were: motor vehicles (1.9 billion euros); medicines and pharmaceuticals (€ 1.1 billion); machinery (836 million euros); chemical products (501 million euros).

Data source: Elaboration on Istat data (ICE London)

1 2