Maket of freedom of choice

Data published by the National Office of the Trade Register (ONRC) show that the number of companies and authorized tradesmen (PFA- microenterprises) that entered insolvency has dropped by 10.11 pct in the first eight months of 2020, compared to the similar period of last year, to 3,576 insolvencies.

What was particularly underlined, however, is the fact that in three areas of Romania there was an increase in the number of insolvencies: most companies and PFAs that went into insolvency were registered in Bucharest, respectively +765, increasing by 14.35% compared to the period January-August 2019. On the next places in the insolvency hierarchy are Bihor counties, with 256 insolvencies (21.95%), Cluj  with 206 (+ 33.77%) and Constanța 212 (+ 7.07%). Bucharest, Cluj and Constanța are among the engines of the Romanian economy. Moreover, Cluj, Constanța and Bihor are three significant tourist areas in Romania.

In regards to the domains of activity, in the first eight months, the highest number of insolvencies was registered in retail and wholesale. These figures show the downward trend in consumption as an effect of the pandemic, but also the effect of restrictions to prevent the spread of cases of infection. The fact that, for the time being, on average, there has been an average decrease in the number of insolvencies in the first eight months of the year, shows that support measures for entrepreneurs (postponement of taxes, state unemployment) have had an effect, at least partial.

A CITR study predicts that the true effects of the pandemic on the economy will most likely only be visible in the next 6 months. The same study shows that:

-in Romania there are 30,000 impact companies, of which 70% could be in difficulty in the next 6 months;

-57% of the impact companies in insolvency in the CITR portfolio postponed, on average, 3 years accessing restructuring options, and this generated a decrease in turnover by 50% and an increase in debt by 30%;

- timely access to restructuring mechanisms could save 400,000 jobs out of 12,000 impact companies in difficulty.

But, in addition to the impact companies, there are a plethora of SMEs that are already facing great difficulties and still resist because their survival depends on the financial survival of some households whose income depends on the running of these small businesses. Likewise, small communities, isolated local markets and consumers depend to a large extent on the existence of these businesses. For these SMEs it is a daily struggle in the last 6 months to withstand this unfortunate period and which tests their resilience.

According to the annual financial stability report of the Central Bank of Germany (Bundesbank), German banks must prepare for an increase in the number of insolvencies, as the crisis caused by the coronavirus pandemic (Covid-19) has pushed companies beyond limits and put them under pressure. Why would the situation be different in Romania, where the economy is much more fragile and has been hit by a wave of irrational, anti-economic and / or populist initiatives?

Recently, the Finance Minister said that further measures to suspend the payment of installments to individuals and to help entrepreneurs and their businesses may be needed. Rescue funds are also being prepared by the European Union through the SURE program. These measures are vital for safeguarding the interests of the population and a mouthful of oxygen for the business environment.

If in all this gloomy landscape is added a forecast of increasing budget expenditures with the public health system that is under pressure from the pandemic, therefore, channeling significant financial resources to a system that does not bring revenue to a budget, we realize of little relevance is a statistic of the number of insolvencies read in an optimistic note and not accompanied by projections for at least 6 months from now.

For the economic forecasts, the Americans added another letter to the letters V, W, L, and U, which shows the darkest future: K. It represents a battle for economic recovery and a fall into an abyss. The reality of the last 6 months shows us that anything is possible in terms of crisis.

Small and medium-sized enterprises (SMEs) make a crucial contribution to the national and European Union economies and are the main source of growth and innovation in an economy. It is very important now for the return of the national economy to develop and implement friendly and business-friendly policies, with entrepreneurs, with SMEs, which undermine the well-being of some households and give consumers access to various and competitive offers. To suffocate them through initiatives such as the minimum gross wage increased by centralist decisions or with the unrealistic and accelerated increase of the pension point, means to confiscate both the future of some businesses, of some jobs, depriving consumers of goods and services and increasing dependence on imports. Market presence, know-how, consumer trust and loyalty are the intangible assets that differentiate between success and failure. Jobs, well-being and financial independence are hard to earn and easily destroyed and lead to dead ends for entrepreneurs and a lack of options for consumers.

Then, why cultivate dependence in favor of freedom of choice?

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