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AAFBR’s Guda: Romanian companies, more vulnerable to new crisis than in 2008

Increasing the companies’ average debt collection time, shrinking the middle class and lowering the capitalization level of companies have increased the vulnerability of the Romanian economy, compared to 2008, in the case of a new financial crisis, according to a study submitted by Iancu Guda, president of Romanian Financial-Banking Analysts Association (AAFBR) and lecturer of the Romanian Banking Institute (IBR).

He also points out that the current macroeconomic data resemble those of 2008, indicating a record economic growth driven by consumption, which results in a widening trade deficit, a credit advance, and an increase in the fiscal deficit.

In January – June 2017, the balance-of-payments current account posted a deficit of EUR 2,745 million, compared with EUR 1,958 million in January – June 2016, meaning an increase by 40 percent, National Bank of Romania (BNR) reported recently. The deficit on trade in goods widened by EUR 1,051 million, the secondary income and services surpluses narrowed by EUR 247 million and EUR 51 million respectively, while the deficit on primary income contracted by EUR 562 million.

The only notable negative differences in the present are the two-fold higher public debt in GDP, a lower workforce, and a significant decrease in public and foreign investment, Guda said.

Talking about the very low degree of Romanian companies’ capitalization, AAFBR official stresses that the only sectors with a capitalization of over 40 percent at the end of 2016 are the production and supply of electricity and heat, water and gas (43 percent), financial intermediation (43 percent) and IT (42 percent), while sectors with a capitalization of less than 15 percent are those represented by recreational, cultural and sporting activities (9 percent), construction (10 percent) and health and social assistance (15 percent)

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