Ooni Koda
  1. Home
  2. /
  3. Newsfeed
  4. /
  5. COFACE Study: Insolvencies in Romania down by 4%...

COFACE Study: Insolvencies in Romania down by 4% in H1 2023 compared to H1 2022

October 18, 2023

* In the first half of 2023, 49,349 LTD companies were registered, this being the lowest number of LTDs registered in the first half of the last 13 years.   The latest Coface Romania study conducted a month ago shows that in H1 2023, 3,358 new insolvency proceedings were opened, down by 4% compared to the same period of last year. A decrease is also seen in the case of losses caused by companies entering insolvency in the first semester of 2023, by approximately 26% compared to H1 2022, to almost 2.2 billion lei. The number of insolvent companies with a turnover of more than EUR 0.5 million decreased from 164 companies to 154.   The economic context – outlook of the last 5 years   The business environment in Romania continues to face multiple challenges, the year 2023 being marked by fiscal uncertainties. Public revenues increased by only 10% in the first semester compared to the budgeted level of +17%, while expenditures had an advance of 16%, above the expected 14%. In this context, the annualized fiscal deficit for the current year may exceed the 6% threshold in the absence of adjustment measures, compared to the 4.7% target assumed in the budget.   The evolution of companies, however, can be understood if we analyse the dynamics of the financial statements for a 5-year economic cycle (2018-2022), marked in the middle by the impact of the Covid-19 pandemic (2020). Thus, the sales recorded by active companies in Romania reached 2,370 billion lei in 2022, 56% more than the level recorded in 2018 and above the cumulative inflation during this period of 33%.   Cumulative net profit at the level of the entire business environment increased from 81 billion lei in 2018 (5.4% of sales) to 200 billion lei in 2022 (8.4% of sales). Challenges remain, however, due to income polarization and concentrated profit growth among large companies or only for certain sectors of activity. Thus, 75% of the sales growth of companies in the last 5 years is generated by only 8 sectors. If companies’ revenues are concentrated in a few sectors, profit dynamics reflect higher profitability margins for small businesses, but which collect invoices much slower (224 days for businesses with revenues < EUR 100k, significantly above the national average of 86 days).   The evolution of insolvent companies   The most insolvencies were opened in the following sectors: Construction (734 insolvencies), Wholesale and distribution trade (453 insolvencies) and Retail trade (423 insolvencies). The number of companies that have opened insolvency proceedings is down by about 4% compared to the first semester of 2022, but up by 13% compared to the 2nd semester of 2022 and by about 1.5% compared to the first semester of 2019.   According to the data published by CIP provided by the National Bank of Romania, the amounts refused for payment with debit instruments during the first semester of 2023 totalled 1.18 billion lei, with 14,718 payment instruments being refused for payment. These values represent a 69% increase in the amount refused in the first half of 2023 compared to the same period in 2022 and a 12% increase in the number of payment instruments refused. It is the first time since 2009 that we have recorded a half-yearly increase in both the value and the number of refused payment instruments.   “Despite a challenging economic and geopolitical context, Romanian companies demonstrated resilience in the first half of 2023. However, the current economic environment remains marked by multiple challenges: the slowdown in economic growth (only +1.7%, H1 2023), a still high inflation, high value of monetary policy interest and implicitly high financing costs, price volatility on the energy market, pressures on the labour market. It is possible to witness an increase in the number of insolvencies in the coming period. As a provider of commercial credit risk management services, we follow all these developments to support the local business environment with solutions adapted to current needs”, declared Alina Popa, Coface Romania Country Manager.   The Construction sector will remain vulnerable in terms of companies that could become insolvent, especially in the residential sector, given the possibility of the elimination of tax exemptions and the decrease in lending. It should be noted that the construction sector was the most important net employer in the economy in the last 5 years, registering an increase in the number of employees by approx. 104,000 jobs in the analysed period, followed by IT (53,000) and health and social assistance services (+15,000).   Overview of the business environment – What does 2023 look like and what does 2024 have in store for us?   In the first semester of the current year, 77,706 new companies were registered, of which 49,349 were LTD companies. The number of newly registered LTD companies is 15% lower compared to the first semester of 2022. On the other hand, the total number of newly registered companies in the first semester of 2023 is slightly higher compared to the number reported in the same period last year. At the same time, however, the number of companies that exited the economy in the first semester of the current year is 3% higher compared to the evolution recorded in the same period of 2022.   The consolidation of the balance sheet to the pre-pandemic level, marked by the increase in investment and capitalization, reflects a decreasing dependence on external financing. Although the commercial dynamics are very good, marked by the advance of sales and profit well above the level of inflation, the positive results of the last year are concentrated in a few sectors (trade, construction, IT, agriculture, energy, and gas) or among large companies. Despite higher profit margins, small companies remain especially vulnerable due to the much slower speed of debt collection and tax changes.   In the present study, newly opened insolvencies were considered, based on data published by BPI (Bulletin of Insolvency Procedures). For example, all companies with insolvency procedures opened in the first half of 2023 (according to BPI) and not listed as being in operation in mid-July 2023 (according to ONRC), were considered as newly opened insolvencies during the first half of This year.    

Read in full - click here
Junot Díaz, Tracy Chevalier, Michel Bussi: Iași literature festival announces first guests at 2025 edition

Pulitzer Prize winner Junot Díaz, Tracy Chevalier, the author of the international best seller Girl with a Pearl Earring, and French author Michel Bussi, known for his widely translated thriller novels, are among the authors set to attend this year’s Iași International Literature and Translation Festival (FILIT), the largest literary festival in the country. They […]

A Taste of Nature: Michelin-Starred Chef Theodor Falser brings his culinary artistry to JW Marriott Bucharest

Bucharest is about to welcome a culinary moment like no other. This September, the JW Marriott Bucharest Grand Hotel will host Michelin-starred Chef Theodor Falser - a name synonymous with nature-inspired haute cuisine - for three exclusive evenings that promise to delight the senses and tell stories through food. The Chef Who Cooks Nature Theodor […]

Government: IMF backs Romania’s fiscal measures, sees 1% GDP growth in 2025

The International Monetary Fund (IMF) has endorsed Romania’s latest fiscal measures, forecasting that the economy will grow by 1% in 2025 and 1.4% in 2026, the government said Friday, September 12, after talks with a visiting IMF delegation. The delegation, led by Joong Shik Kang, met prime minister Ilie Bolojan in Bucharest to discuss the […]

Romanian theater stages robot-only performance exploring technology and e-waste

The George Ciprian Theater in Buzău has unveiled “E-Waste E-Motion,” the first performance in Romania in which all characters are played by small autonomous robots, blending art, technology, and sustainability in an experimental theatrical project. “E-Waste E-Motion” is part of a broader artistic research initiative supported by the National University of Theatre and Film (UNATC) […]

Emmy Stoel appointed as the new General Manager of InterContinental Athénée Palace Bucharest

With extensive experience in the luxury hospitality sector, gained as General Manager of Sofitel Legend The Grand Amsterdam and Hotel Okura Amsterdam (LHW), as well as in various Director of Operations and Business Development roles, Ms. Emmy Stoel is a seasoned professional whose career reflects a deep passion for excellence in guest service, having successfully […]

Update: Six knives found on woman trying to enter Romanian Parliament

Update: The woman made her first statements on Friday afternoon after being questioned. According to Digi24, she told journalists outside a police station in Bucharest that the items were family heirlooms from the Soviet era, and that she...