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Coface : Romania’s economy will fall by 1.5-2% this year

Romania's economy will suffer a contraction of approximately 1.5-2% this year, as a result of the austerity measures, Coface Romania estimates, the company revising their initial prognosis which estimated a growth of 0.5% of GDP.

The representatives of the agency show that, although the measures taken by the government over the last period aim at the reduction of the budgetary deficit, they question the deficit target and create the premises for negative effects on the economic activity by the lack of a support package and probable effects on the consumption.

« If the initial package announced supposed high social costs, aiming at the reduction of budgetary expenditure with direct effect on the deficit, the increase of the VAT tax from 19% to 24% seems to be a measure to fail, as income increase is not guaranteed. The contraction of consumption will diminish the taxing basis and the supplement of sums collected for the budget supposed to happen by the increase of VAT. The negative effect will be felt by the companies and the end consumers' the Coface press release says.

The representatives of the agency show that the VAT increase will be seen in inflation growth as the increase of taxes will directly influence the prices of the suppliers and distributors who cannot absorb that kind of diminution of commercial margins.« The increase of fiscality will have a strong psychological effect that will determine the reduction of consumption and the reduction of sales, with direct effect on liquidity and will pressure the private environment.The companies will try to apply new measures of restructuring of the costs to adapt to the market, which could lead to the increase in the number of unemployed in the private sector' they think.

The Coface representatives show that the lack of positive economic factors, the most likely lending will be still restrictive, both from the point of view of costs and guarantees, the level of liquidities on the market being low. At the same time, the increase of fiscality will lead to the increase of fiscal evasion and the coming back to underground economy, the income to the budget will be under the target.

Under these conditions, the companies will be confronted with drops in sales as they will incapable to absorb long shocks and manage the new economic reality, increasing the number of incidents of insovable payments.Coface estimates that the number of bankruptcies will increase over the next half year, 2010 being a new maximum for the number of companies leaving the market.

« The most affected companies will be the ones in the commerce as they have very reduced commercial margins, reduced capitalization and the dependence of such companies on short term financing. At the same time, the significant delays recorded for the payment of construction works, delay or annulment of certain projects by investors were important factors for the lack of liquidity on the construction market; the increase of VAT will show the incapacity of the constructors to come back to the normal level of liquidity and will amplify their negative position. Together with commerce and constructions we expect the number of bankruptcies to increase in such domains as metallurgy, transports, HORECA' the press release says.

Sursa: http://www.actmedia.eu

Tags: number companies increase economy coface

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