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Insolvencies down, strike-offs up in H1 2019 in Romania; big companies facing hardships

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Company insolvencies in Romania declined 33pct in H1 2019 , but the decrease is nullified by an increase in stricken-off companies, while delays in payment increased significantly, and big companies are facing with a difficult economic environment, according to a recent Coface study.

"A new study conducted by Coface Romania in the development of insolvencies in Romania in H1 2019 points to a decrease in the number of insolvent companies in by 33pct amidst a sustained real economic growth of 5.1pct. However, the macroeconomic development is not sustainable due to several imbalances: the fiscal deficit having widened by 81pct in the first half of this year compared with the same period of the previous year; the highest annual inflation in the EU, of 4.1pct; a widening trade deficit and the depreciation of the local currency. Moreover, the Coface analysis shows that the decrease in company insolvencies is nullified by an increase in stricken-off companies, significant delays in payment, and big companies facing a difficult economic environment," Coface says in a press statement released on Wednesday.

The business environment remains highly polarised, with the first 1,000 companies by turnover posting half of the revenues of all 500,000 companies operating in Romania.

Regarding the number of large companies (with a turnover in excess of 0.5 million euros) that filed for insolvency in H1 2019, a decrease by almost 40pct to 174 insolvent companies was recorded, the lowest level in the last decade.

According to the Coface study, the first three sectors with the largest number of insolvencies are wholesale trade and distribution (480), the construction (438) and retail trade (387).

Thus, out of the total of 3,058 insolvent companies in the first half year of 2019, 1,529 filed financial statements for their 2018 business.

The findings of the Coface study confirm that one of the main causes that fueled the risk of insolvency was worsening liquidity, which was offset by more loans.

According to the data published on the website of the National Companies Registry Office (ONRC), the number of insolvent companies and individual traders decreased by 28.76pct in H1 2019 from H1 2018, to 3,196 insolvencies. The number of stricken-off companies increased by 62.41pct, to 67,807.

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