Coface estimates economic growth of 2.1 pc this year

Export growth will slow down, according to the report. Likewise, an inflation rate
of 3 – 3.5 pc and an exchange rate of RON 4.55/EUR is estimated.

The Romanian economy will remain on an upward trend this year, but the growth will ease down to 2.1 per cent in a mainstay scenario, against the backdrop of a slower growth of exports and of a sluggish recovery of consumption given the very low consumer confidence, Coface informs. Coface representatives believe that the turn towards saving will continue and the banking sector will remain affected by a growing rate of bad loans, a rate that reached 21.6 per cent in September 2013, representing the highest level in the region with the exception of Greece.
The year 2013 confirmed Coface’s estimates concerning Romania’s economic growth, the company’s forecasts pointing to a 2.5 per cent growth in the mainstay scenario. “2013 confirms the trend of accelerating economic growth. Thus, I could emphasize the agriculture’s important contribution to economic growth, a contribution that is difficult to estimate in the economic evolution of 2014. For the current year we estimate a GDP growth of 2.1 per cent, as a result of a slow-down in exports and a gradual but arduous hike in consumption. We consider that Romania’s challenges in 2014 will have to do with the banking sector, affected by a growing rate of bad loans, as well as with a record number of insolvencies in 2013 among SMEs, which will affect the private sector this year too and will prevent Romania’s economic development from reaching its true potential,” Constantin Coman (photo), Coface Romania Country Manager, stated, Mediafax informs.
Likewise, the company maintains Romania’s rating at “B,” among the lowest in Central and Eastern Europe, the rating being similar to that of Hungary and Latvia. Poland and Slovakia are the Central and Eastern European countries with the best rating, namely “A3.” For this year the government and the IMF estimate a GDP growth of 2.1 – 2.2 per cent.
At the same time, Coface estimates an inflation rate of 3 – 3.5 per cent this year, against the backdrop of a better evolution in the first half of the year and a stabilization of the exchange rate around RON 4.55/EUR, Constantin Coman, Coface Romania Country Manager, stated. “The forecast does not take into account sudden changes in the Fed’s monetary policy, or local political backsliding,” Coman added.
Approx. quarter of insolvent companies in 2013 were profitable
Approximately a quarter of the companies that went insolvent in 2013 were profitable or had a positive theoretical liquidity, so that faulty management decisions rather than financial underperformance were the cause that led them to default, the report also shows. ‘The number of companies with turnovers higher than EUR 1 M that went insolvent is 718, compared to 485 in 2012. The insolvency of SMEs in 2013 will have a domino effect in the economy and will draw more SMEs into insolvency. In the absence of legislative measures in the insolvency domain the number of insolvencies will grow by up to 10 per cent, mostly among SMEs,” Iancu Guda, Coface Romania Macroeconomic Analyst, stated.
Coface representatives estimate that it is not enough for companies to be protected from insolvency, since both working capital and positive profit represent an enhancement of future liquidities which, if not realized (the stocks are not sold according to expectations, the debts are not collected in line with the deadlines), create problems for the company when it comes to honoring its contingent payment liabilities.
According to preliminary data published by the Insolvency Procedures Bulletin on the basis of the Coface methodology, 26,372 new insolvency procedures were opened last year, up by 2 per cent year-on-year (25,842 insolvencies were opened in 2012). The data is preliminary, with the final figures set to be confirmed by the end of Q1 this year. “Thus, preliminary data confirms a 12 per cent hike in insolvencies opened in Q4 of 2013, compared to the same quarter the year before, and Coface’s estimates of the final data put the hike at above 20 per cent,” Coface representatives state. Likewise, the companies that went insolvent last year had registered a year-on-year turnover drop of 11 per cent in 2012, while the value of their outstanding debts grew by 2 per cent.

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