Romania posts the second lowest number of active companies in Europe

Romania has the second lowest number of active companies per thousand inhabitants in Europe, according an analysis of the financial-banking analysts in Romania.

Overall, there are 500,000 active companies on the local market, with their number being relatively constant despite the economic growth in the past decade.

Moreover, out of the total 500,000 firms, only 1,000 of them are concentrating about a half of the incomes reported by all companies in Romania. According to analyst Iancu Guda, these figures prove that the middle ground of the economy is extremely weak, which risks leading to the economic system’s low capacity to absorb shocks during major changes, such as tax amendments, increases of interest rates or the fluctuation of unemployment.

Out of the 500,000 Romanian active companies, 90% of them are micro-enterprises, and 70% are so small that they don’t even have access to loaning.

The same survey shows that the vulnerability of the local business environment is also fueled by another major factor, a economic growth depending on consumption.

Half of the incomes of the big players in Romania is focused on wholesale trade and on retail trade, meaning on consumption.

At the same time, the big companies have some advantages that small entrepreneurs don’t have – a higher visibility over their industry, but also a bigger portfolio of customers.

The analysis points that the average age of the largest 1,000 companies in Romania is 19 years, almost double against the average lifespan of an usual company. So, bigger firms have a wider expertise in feeling better the economy trends.

However, the financial behaviour of the market leaders in 2018 indicates that they are more and more cautious, showing signs that hard times are ahead. More precisely, big companies have already announced the postponement of major investments, while diminishing their debts and keeping capitalisation at a high level.