I don’t usually write news articles on this blog, but I believe that this particular topic is of an extreme importance for those considering to visit Romania in the near of far future, but especially those considering to make a move here.
Because, yes, as the title says it, Romania’s Stock Exchange – BVB, Bursa de Valori Bucuresti or the Bucharest Stock Exchange – whatever you want to call it, has just been promoted to Emerging Market Status from its former ranking as a Frontier Market.
The announcement comes from the official BVB website, which calls it a “historic moment” for the country – and I do agree that this is extremely good news with potential long-term implications and effects.
The Romanian Stock Exchange has been on the watch list for promotion for three years already, and it got the upgrade to Emerging Market on September 26th. However, the actual promotion won’t become active until September 2020.
“Romania’s upgrade to Emerging Market status represents an acknowledgement of the progress of the local capital market and represents a step of paramount importance in its development,” said BVB’s CEO Adrian Tanase.
“The investment grade of the country will be mirrored on the local stock exchange once the reclassification is done as the stock market is nothing but a faithful reflection of a country’s economy. When the stock market is doing well, the economy is doing well,” he added.
“Now, we are here facing a historic moment: it’s the international recognition that Romania deserves to be promoted and I am happy and proud to lead the team that made it possible”, BVB’s CEO further said.
What does this mean for Romanians, travelers and expats?
I would say that this is great news for most people, proving what I’ve been saying in previous articles in one form or another: Romania is developing, it is growing and it is getting better and better with each new year.
Right now, I could say that we’re in a pre-recession status: new buildings – both offices and living spaces – are built in most larger cities like there’s no tomorrow, salaries are increasing, the quality of life is increasing and things are looking really good in general.
There are indeed many voices who claim that the current growth is unsustainable and the many loans that Romania keeps piling up will eventually bite back – and do it hard – but the undeniable reality is that things are indeed looking good at the moment for the regular folk.
Of course, for people who want to visit Romania or consider relocating here because it is such a cheap country to live in, things become a bit more complicated.
This growth – which is confirmed by the promotion of the Romanian Stock Market – also comes with negative side effects: the cost of living is increasing. Rents are going up and prices for homes and apartments are at an all time high.
Another interesting thing is that other cities in Romania are growing a lot and Bucharest is no longer the only go-to place if you’re looking for financial gains, opportunities and things to do. I remember reading, a few days ago, that salaries in Cluj Napoca are now bigger than those in Bucharest, on average, while the rental prices were already considered the highest in the country.
I have recently been to Timisoara – and wrote about it in my updated article, and it was pretty obvious to me that it has grown tremendously in the past several years. The same goes for Oradea and I am sure many other cities in the country.
How will the inclusion of the Romanian Stock Market on the list of Emerging Markets influence the prices, cost of living and everything else in Romania?
Most likely, it won’t have a huge impact for the regular people living here, although long term this promotion will definitely mean something.
Going one step higher on the stock market rankings means not only that more people will probably start investing in Romanian companies (as some will probably included in index funds and other similar things), but also foreign investors will look at Romania from a different perspective.
Having this official – and extremely important – confirmation that at least the business sector is doing really well will most likely boost growth and help the country to better overall.
This could also mean that the cost of living will continue to increase, but hopefully in parallel with improved health care, services and infrastructure.
Because, despite its current growth, Romania is still behind in many areas.
But fortunately, for most expats and travelers, the increased costs shouldn’t really pose a problem. Romania remains one of the cheapest countries in the European Union and its salaries – despite their constant growth – are still second to last in the EU.
And while living on $1,000 per month in Romania is getting more and more difficult, I still believe that is doable under specific circumstances and there are still many families (not individuals!) that make ends meet on a lower budget.
Back to the Bursa de Valori Bucuresti (the Bucharest Stock Exchange)
At the moment, there are relatively few companies listed on BVB: 84 of them, but still an increase compared to the 6 that were listed when the Romanian Stock Market opened back in 1995.
I did look at the prices of the shares of the most important companies listed there (as well as some random ones I knew little about) and the news doesn’t seem to have had a major impact.
However, the share prices have done, on average, really well this year, increasing constantly from month to month since January 2019 (after taking a massive hit in December 2018). The Romanian companies are also paying some of the best dividends in the European Union – and these things alone could make them really interesting to potential investors.
Still, since the actual listing of the Romanian Stock Market on the Emerging Markets won’t go into effect until September 2020, chances are that this announcement won’t have an immediate impact.
It might have none at all, but the important thing for most of us – those living or interested about making a move to Romania – is that this promotion signals, or confirms, the fact that Romania is growing and going full steam ahead. Which is both surprising and reassuring at the same time.
This is just part of the story, though. Things are not going really well on all fronts. For example, the local currency, the Romanian Leu, gets weaker and weaker against the important currencies of the world: both the Euro and the US Dollar are worth more and more Romanian Lei, but also other currencies.
This year, both the Euro and the US Dollar reached historical highs and they seem to keep going up, while the Leu is going down.
In other words, despite the increased cost of living that you can see in the country, expats and travelers depending on foreign currency won’t feel the effects as much, because both the Dollar and the Euro are getting stronger.
Which is definitely strange (although I’m not an expert). Still, you would expect to see things going well in all areas, right? But I believe that the fact that some areas do better while others not so much proves that there is still a lot of work to be done in Romania and there are still many things that have to start going upward – or be fixed – until we can wholeheartedly state that things are indeed getting better.