Romania records an alarming number of closed businesses in the first months of 2022, the most significant number of failed companies in the last three years.
Over 40,000 enterprises were radiated in the first four months of 2022. The specialists say that this number of deregistered businesses demonstrates the growing inflation effects in Romania.
According to a study by Frames and Sierra Quadrant on the dynamics of business sector issues, 1,008 trade and construction companies went bankrupt between January and April 2022, up 61 from the same period the previous year. Additionally, 8,390 people were dismissed from their jobs, up 349, 4,302 businesses were dissolved, and 1,729 enterprises suspended operations (plus 265).
11,568 businesses in the commercial sector had troubles, and the most frequent choice was to write off the company. 3,861 businesses in the construction industry were insolvent, closed, deregistered, inactive, or in financial distress.
Trade, the most dynamic sector of the economy, is unfortunately also the most vulnerable in the context where more than 90% of companies are poorly capitalized and depend exclusively on the rate of receipts. The negative evolution of the construction sector, significantly affected by the increase in the prices of construction materials and the restriction of Romanians’ access to credit, represents, from our point of view, the most critical alarm signal in this period, given that this business employs hundreds of thousands of other horizontal companies.Ovidiu Neacșu, Sierra Quadrant coordinating partner
In the first four months of 2022, 40,760 businesses across the economy closed an increase of 3,721 from the same period in 2017. In contrast, there were 12,495 fewer struggling businesses in 2020.
The leading causes of this high number of business closures are inflation, restrictions on credit availability and rising interest rates, a worsening financial blockade, a sharp decline in sales, and the population’s escalating economic woes. The budget deficit exploded in conditions where the very high inflation rate increased budget revenues. At the same time, the degree of execution of investments is at the level of 2019, below 2020 and 2021.