Unlocking Romania’s Potential

For nearly two years, frontier market Romania has been on index provider FTSE’s watch list for a possible upgrade to emerging-market status. However, some issues remain over the market’s attractiveness for foreign investors. Johan Meyer, senior vice president and CEO of Franklin Templeton Investment Management Ltd UK, Bucharest Branch, shares what he thinks it could take for Romania to make the cut.

In recent years, Romania’s economy has been one of the fastest growing in Europe, with strong domestic consumption, low unemployment and fiscal stimulus acting as drivers.

Its economic progress has helped spur a burgeoning middle class, with increased consumer demand not only for goods but also health care, technology and financial services.

Given progress in a number of areas, Romania has been on the cusp of gaining emerging-market status since September 2016, when it was included in FTSE’s “watch list” for reclassification to secondary emerging-market status.

According to the index provider, Romania meets eight out of nine of its “Quality of Markets” criteria. The main hurdle Romania has to clear before joining the ranks of emerging markets is an improvement in the liquidity of stocks listed on the Bucharest Stock Exchange (BVB).1

It is unlikely for this to happen before the next FTSE classification review, due in September 2018. However, we think more initial public offerings (IPOs) could offer a solution to Romania’s liquidity challenge. Large listings—namely privatizations of state-owned enterprises—should help drive investment flows to the overall market. A larger number of sizable companies could improve the visibility of the BVB among investors, and may lead to higher multiples being paid for the shares of these companies, provided that the interest of minority shareholders are safeguarded through the implementation of corporate governance standards in line with international best practice.


  • Romania is the largest south-east European country.2
  • The railway network is impressive. Romania’s 11,000 km network is the 8th largest in the EU.3
  • Trajan’s Column is one of the most distinctive sculptures to have survived the fall of Rome. It represents a visual history of the wars between the Romans,leadby Trajan, and the last king of the Dacians.4
  • The city of Brasov is home to the largest gothic church between Vienna, Austria and Istanbul, Turkey.5

Growth Outstrips Europe

In 2017, Romania’s economy grew by 7%,6outstripping European Union (EU) gross domestic product (GDP) growth of 2.4% for the same period.7