Coface: Insolvencies in Romania stable at level twice as high compared with CEE average

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Insolvencies in Romania are still facing the same level twice as high compared with the average in the Central and Eastern Europe (CEE), according to official data released on Wednesday by Coface.

“The year 2017 brought 8,256 new insolvency cases, which means a 3 per cent growth compared with 2016, when there were recorded 8,053 new insolvency cases. Despite this being the minimum recorded over the past 15 years, Romania still has an average level of insolvent companies per 1 000 active companies of 2.4 per cent, which is almost double the average in Central and Eastern Europe. Therefore, the most important thing right now would be to evaluate the caliber of insolvent companies from the perspective of the financial losses caused to creditors and also from the perspective of their social dimension, which means the number of lost jobs. From this perspective, 2017 recorded a certain stabilization in insolvent companies with revenues exceeded 1 million euros, 326 of them respectively, compared with 333 the year before,” said the same source.

Nevertheless, say the Coface representatives, the losses generated to creditors by insolvent companies accounted for 9.6 billion lei in 2017, which means a growth of 13 per cent compared with the previous year, worth 8.5 billion lei, in losses caused to creditors. On the other hand, the number of jobs reported by the insolvent companies in 2017 stood at 47,578, which is less by 32 per cent than the year before.

The 3 major mistakes of the companies having gone into payment default were poor financing of investments, bad investments and aggressive dividend policy.

 

Coface estimates 4pct inflation in January, 5pct in Q1

 

Inflation is expected to reach 4 per cent in January and 5 per cent in the first quarter of the year, to drop back to 3.5 per cent towards the end of the year, claim the Coface representatives.

“We will probably see an inflation rate having climbed to 4 per cent in January, with the basic impact caused by the cut in the excise for fuels, to be visible in the beginning, and then it will go up to 5 per cent, in line with the consumption growth, following at a very small distance. In the second half of the year, however, the moderation in demand due to money becoming more expensive and deceleration in salary growths, and also due to the lost of the basic effect, the growth pace should become more moderate, which means that we are in fact talking about a seasonal inflation very much related to the basic effect,” Iancu Guda, services director with Coface Romania, told a press conference.

Eugen Anicescu, Country Manager Coface Romania, also said he noticed an increase in prices for basic stuff.

“In terms of inflation we notice an increase in basic products. All this growth in salaries will translate also in (increases in prices – editor’s note)… with companies already facing very low levels of profitability and there will be need of a part of cost growths to be taken over by prices. There is not enough time to prepare and innovate a restructuring that would allow the prices to be maintained,” said Anicescu.

He claims that BNR will increase the monetary policy interest rate up to 3 per cent this year.

 

Guda : Romanian economy is more sensitive to high interest rates than to a weaker leu

 

The Romanian economy is more sensitive to high interest rates than a weaker leu, with the National Bank of Romania (BNR) facing a dilemma because of this, says Iancu Guda, services director with Coface Romania.

“Inflation is already stepping up heading to 5 per cent in the first half of the current year and we have really negative interest rates. And that’s why the BNR is currently facing a dilemma, for you cannot maintain interest rates at low levels and have a strong national currency at the same time. In the recent period, they were quite consistent in preparing the markets to rather prefer a weaker leu with a higher volatility, while they wish in exchange to maintain the interest rates under control, and they also showed that, with a ROBOR exceeding 4 per cent per 3 months, half of the companies in Romania wouldn’t be capable of paying their loans to banks and have operation profit at the same time,” said Guda.

He specified that 38 per cent of the loans granted to the business environment and individuals are denominated in foreign currency.

“We have an economy that is more sensitive to higher interest rates than a weaker national currency. Today, 38 per cent of the loans contracted by the business environment and individuals are denominated in foreign currency. In 2008-2009, we had 61-62 per cent. The process of always choosing euro has lost significant ground and the efficiency of the monetary policy in terms of transmission is much better now,” explained the Coface head.