Analysis: Romanian economy needs EUR 32 bln recapitalisation

 Romanian companies would need 160.5 billion lei (31.7 billion euros) in recapitalisation, equivalent to almost four years of foreign direct investment at the record level reached in 2025, according to an analysis by Sierra Quadrant, released on Wednesday.According to Sierra Quadrant analysts, an undercapitalised company is not necessarily an inactive one, but a fragile business that may fail to withstand a shock that a better-capitalised company could weather without major difficulties."And in 2026, the shocks are piling up: high interest rates, five fiscal packages in one year, record energy costs and weakening domestic demand. The result is already visible in the records of the National Trade Register Office," they say.For companies that reported results at mid-2025, representing approximately 84% of the economy's total turnover, the capital shortfall stood at 36.4 billion lei, up 8% from the previous year."A more recent report by the National Bank of Romania, published in June 2026, shows that the number of undercapitalised companies increased by 10%, while the recapitalisation requirement remained at 36.4 billion lei. In other words: more companies, the same gap. The shortfall is not being closed, but redistributed across a larger number of companies - a sign that this is not a temporary phenomenon, but a structural feature of the economy. One technical detail is worth explaining, because it is exactly the kind of statistic that can generate misleading headlines. Undercapitalised companies accounted for just 9% of the total in June 2025, compared with 32.6% at the end of 2024 - an apparently spectacular improvement. The real explanation, however, is not an economic recovery but a statistical artefact: most small companies are not included in the mid-year reporting exercise, meaning that the sample analysed in June 2025 is different - and, on average, financially healthier - than the one at the end of the previous year," the analysis based on BNR data shows.In June 2025, the liabilities structure of non-financial companies was as follows: equity ranked first, accounting for 40% of liabilities; trade payables ranked second, at 18%; while financing from Romanian financial institutions accounted for just 9%.In other words, supplier credit is twice as important as bank lending in financing the Romanian economy."Romanian companies rely more on delaying payments to suppliers than on bank loans - a practice that works relatively well during periods of economic stability, but becomes extremely risky when payment delays spread throughout the economy," explains Ovidiu Neacsu, managing partner of Sierra Quadrant.Statistics show that the debt-to-equity ratio reached 140.5% in June 2025, 5.4 percentage points above the previous year, continuing a clear upward trend. More significant, however, is the upper end of the distribution: the share of companies with a debt ratio above the 200% warning threshold rose to approximately 35%, both in terms of the number of companies and their share of the economy's turnover. Most companies that subsequently enter restructuring, preventive arrangements or insolvency generally come from this category, the analysis shows.At the same time, debt-servicing capacity is gradually deteriorating. The interest coverage ratio - the ratio between earnings before interest and tax and interest expenses - fell to 541% in June 2025, down 32 percentage points from the previous year and 118 percentage points from June 2023.Foreign exchange risk is also concentrated among companies, with 53% of the loan portfolio of non-financial companies denominated in foreign currencies in March 2026, compared with just 7% of household loans.Company deregistrations are also rising again. National Trade Register Office data for the first half of 2026, cited by Sierra Quadrant, show a clear reversal in the trend. Between January and June 2026, 46,283 deregistrations were recorded, 5.69% more than in the same period of 2025. In the same period last year, deregistrations had fallen by 3.85% from 2024, from 45,548 to 43,793. In 2026, the total returned to growth and was also slightly above the level recorded two years earlier, by 1.61%.More important than the level is the pace: 7,145 deregistrations were recorded in June 2026 alone, compared with 6,545 in June 2025, an increase of 9.17%, significantly above the half-year average. The trend is accelerating rather than fading.Bucharest recorded 8,188 deregistrations in the first six months, 624 more than last year, an increase of 8.25%. The capital accounted for approximately 17.7% of the national total and alone generated around a quarter of the net increase compared with 2025."The picture is not uniform: deregistrations increased in 26 counties and fell in another 16, while in 27 counties the level remains below that recorded in the first half of 2024. The phenomenon is concentrated in the major economic centres - precisely where business density is highest and the business life cycle is fastest. One clarification is necessary: deregistrations should not be confused with insolvencies or bankruptcies. The data include companies, authorised individuals and other forms of organisation, while deregistration from the Trade Register does not indicate, in each individual case, the reason for the closure. They measure exits from the market, not failures. Separately, more than 3,850 companies and authorised individuals entered insolvency in the first six months of this year," Sierra Quadrant analysts explain.The conclusion is that large corporations are surviving, while SMEs are not.The 160.5 billion lei required for recapitalisation will not be covered by the state or by banks. In an economy where bank financing accounts for 9% of companies' liabilities, even doubling lending would address only a fraction of the problem."There are three real sources, and all are currently constrained or insufficient, from retained earnings to shareholder contributions and the capital market. The latter should theoretically be the most suitable solution for medium-sized companies, but in practice it is used by very few Romanian firms, in the absence of a listing culture and suitable financing instruments," says Ovidiu Neacsu, managing partner of Sierra Quadrant.According to the expert, undercapitalisation is not an accident, but the result of an incentive structure."A tax system that taxes capital retained in a company in the same way as capital withdrawn from it, an undersized capital market and a banking sector that finances only 9% of companies' liabilities inevitably produce businesses that finance themselves by delaying payments to suppliers. And an economy built on trade credit functions perfectly until the day the first major link in the chain stops paying," Neacsu warns.