Study: Due to COVID-19, one third of all Romanian companies are prone to bankruptcy

The coronavirus pandemic puts at risk hundreds of thousands of companies from the private sector. So far, 37 percent of Romanian companies reduced their activity and 23 percent closed all operations due to COVID-19.

Over 280,000 companies in Romania are currently in a situation of high risk of insolvency, reveals a study conducted by Termene.ro, a platform that offers current information real time about the financial and legal data of the Romanian companies. At this moment, 40 percent of companies continued their activity, 37 percent reduced it, and 23 percent closed operations due to the Covid-19 pandemic.

The insolvency risk is average for 27,000 companies, low for 146,000 companies and very low for 223,000 companies.

“The business plans, the income and expenditure budgets and the cash flow of the companies in Romania are constantly changing from day to day and our decisions, managers and entrepreneurs, are very important in the context of establishing the state of emergency in Romania due to the Covid-19 pandemic. I talk daily with dozens of entrepreneurs and managers, and my colleagues from Termene.ro team get constant feedback from hundreds of companies. It is alarming that at least half of the active companies have reduced or suspended activity due to the economic blockade caused by the spread of the Covid-19 virus,” said Adrian Dragomir, co-founder of Termene.ro.

The economic priority during this period must be the continuity of the business activity of the economic operators, by supporting the entrepreneurs and keeping as many jobs as possible, given that over one million employees are likely to remain without jobs.

From the qualitative observations and conclusions reported by Termene.ro specialists, in the context of the extension of the crisis generated by Covid-19, the activity of the companies is worsening, the number of employees who are on paid leave, in technical unemployment and laid off is constantly increasing, and many the founders do not know if their companies will survive. However, there is also a significant share of companies (50 percent) that continue their activity at a normal rate and in the worst case show investment prudence.

The fact that, in the context of the Covid-19 pandemic, the share of firms with risk of insolvency is constantly increasing, it again restores the concept of payment behavior. Thus, there are premises to believe that at least one third of the Romanian companies are prone to bankruptcy in the short and medium term.