Romania’s insolvency rate, 4 times higher than the regional average

Romania has an insolvency incidence over four times higher than the Central and Eastern European (CEE) average, according to a study by Coface. About 45 of 1,000 active companies in Romania entered insolvency in 2014, the highest rate in the region. Serbia came second, with 41 insolvencies for each 1,000 companies, followed by Hungary, with 29. At the other end, Poland only had 0.5 insolvencies for each 1,000 companies, while the regional average was 10. One of the main causes for the high insolvency incidence in Romania is that, in the 2008-2013 period, many companies have borrowed money to finance long term investments, which haven’t immediately generated higher revenues. On the contrary, their average revenues have declined while the expenses haven’t been adjusted accordingly, which has led to higher losses. At the same time, many companies faced longer invoice payment terms from clients and had to borrow money to cover their short-term liquidity needs, according to Coface. The study also shows that the number of large companies (with over EUR 1 million turnover) going into insolvency started to increase again this year, after going down last year. editor@romania-insider.com