SIMILAR ARTICLES

How Romania is seen from an EU economic indicators perspective

Eurostatistics is a synthesis based on a set of standardized and harmonized benchmarks for the comparability between countries at the European level (Principal European Economic… Mai mult

Quality of economic growth? Let’s look at resource productivity

Romania climbed last year on the penultimate position among the EU member states in terms of the productivity of resources in the economy, after Bulgaria,… Mai mult

Study: Consumption ghosts – Two-thirds of undercapitalised companies have no revenue

Romania’s economy is becoming more and more vulnerable due to the increasing number of businesses that state no revenues, register losses and debts exceeding their… Mai mult

Labour cost, more than 15% higher than last year

Hourly labour cost increased by 15.6% in the second quarter of 2018 compared to the same period of 2017 (+ 9.36%, compared to Q1 2018),… Mai mult

Fiscal Council, about budget amendment: Increase in revenues from VAT and excise duties has no basis

The Fiscal Council announced on Wednesday, the day when the Government adopted the draft budget amendment without the opinion from CSAT, that it considers the… Mai mult

Study: Investment of Romanian companies are risky and with a low multiplier effect across economy. Chance is with medium-sized companies

de Adrian N Ionescu , 26.3.2018

Most of the Romanian companies’ investments are risky – because they use resources in the short term, they are oriented towards “what everyone does”, therefore they are out of phase in terms of profitability. Besides, Romanian companies’ investments have a reduced multiplier effect across the economy, according to a study released on Monday by economic analyst Iancu Guda.

The lack of financing sources adds to the picture: the delay in paying suppliers generated almost 39% of the amount of RON 77 billion invested in 2016 – according to the latest official data.

Otherwise, the loan financing from banks generated RON 37 billion (“this is the total level of new loans granted by the banking sector to all private companies in 2016) and own resources only RON 10 billion, of which 7 billion – reinvested profit and 3 billion by supplementing the share capital.

Study findings are:

  • “Financing long-term investment is not sustainable, with almost 40% being covered by short-term resources;
  • Investments have a strong focus on residential construction and real estate transactions, which:
    • are out of phase (not made at the right time),
    • suffer from the herd instinct (we invest in real estate because most of the others do the same and “we are not good at something else”) and myopia (in the sense that they focus only on the present and do not consider the medium-term evolution of demand and financing costs);
    • Except for software development activities, the sectors with the highest investment rate (consumption, tourism, social welfare services) do not have a multiplier effect on the economy;
  • Increased wage spending, unfair competition (by tax evasion and underground economy) and strong competition from imported products have reduced the level of investment made by the companies that are most affected by these phenomena;

Small businesses (with revenues below one million euros) and large companies (with revenues over EUR 50 million) have a common attribute (though for different reasons):

“have a rate of investment in tangible assets almost equal to their ageing (the ratio between CapEx and depreciation is close to 1),” according to the study mentioned.

*

  • Investment by companies’ size
  • Turnover         CapEx : depreciation   Number           Debts : assets profit : revenues

*

The difference is that while small companies are constrained by limited access to financing, large ones will have entered a period of assimilation and making the most of older investments, according to the article “Five issues of Romanian companies’ investments“.

  • “Small firms cannot make significant investments because of the difficult access to financing and the polarization effect (excessive concentration of revenues to large firms);
  • The moderation of investments on the side of very large firms can be explained by economies of scale (recovery of past investments) and sometimes some self-sufficiency, management convenience and resistance to changing the business model,” according to the source mentioned.

Instead, “the medium business segment, with revenues between EUR 1 and 50 million, is very interesting because they have a rate of investment in tangible assets almost twice as high as their depreciation, while the indebtedness is close to the optimum level (60% – 65%) and the level of profit obtained is the highest”.

At the same time, companies established before 2000 register the highest level of investments, namely RON 32.7 billion.

“Despite that, their investments cover only the level of depreciation, so the value of the tangible assets is relatively stable”.

The companies established in the last five years have the highest level of investments compared to the depreciation, with the ratio of 2.79, according to the economist Iancu Guda, who is also the President of the Romanian Association of Financial Banking Analysts (AAFBR).

Mergeți în homepage ›

Publicat la data de 26.3.2018

Lăsați un comentariu


NEWS

Finance Ministry wants to change rules for insolvency: state could also register claims after procedure is launched

Companies’ possibility to avoid paying creditors (and in particular the payment of tax receivables) simply by declaring their insolvency would be drastically limited, according to… Mai mult

Phil Hogan: Swine fever in Romania has an impact on neighbouring countries and EU trade in pigs

Prime Minister Viorica Dancila, European Commissioner Phil Hogan and Agriculture Minister Petre Daea The swine fever epidemics in Romania has an impact on neighbouring countries,… Mai mult

Infrastructure projects lost EUR 41.5 million following budget amendment. In what projects cuts have been made

Despite the assurances that Dancila government is concerned and intensely working on the road infrastructure projects, at the budget amendment the Transport Ministry has cut… Mai mult

European Parliament have decided to adopt in October a resolution on the rule of law in Romania

Leaders of the political groups in the European Parliament have decided to adopt in October a resolution on the rule of law in Romania. The… Mai mult

"Romania's buffers have deteriorated, the country is less prepared for a negative shock" - IMF will reduce economic growth estimate

Romania will be less prepared if the economy is hit by a negative shock, as the structural deficit has been deteriorated - IMF representative for… Mai mult

Premiere: CSAT asks Finance Ministry to amend amendment - session suspended until Government comes with a draft that does not affect budgets of secret services

President Klaus Iohannis suspended on Tuesday the CSAT meeting for discussing the budget amendment, as there was no consensus on the budgets of institutions from… Mai mult

S&P maintains Romania's rating at "BBB-A-3", with a stable outlook: arguments

Rating agency Standard & Poor's confirmed on Friday ratings for long- and short-term debt in foreign and local currency to "BBB-/A-3" with a stable outlook,… Mai mult

"Romania’s presidency seems to fail before it starts": Gunther Krichbaum - reaction to anti-German violent statements made by government officials

Romania's presidency of the Council of the European Union seems to fail even before it starts, warns Chairman of the Bundestag European Affairs Committee Gunther… Mai mult

OMV Petrom sells a quarter of its deposit perimeters to finance potential gas extraction from Black Sea

OMV Petrom (SNP) will sell another 50-60 perimeters from its portfolio of about 200, as most of the company's investments focus on operating the Black… Mai mult

Emigration continues: 220,000 Romanians left the country in 2017

The number of people who left the country for more than 12 months continued to grow last year, reaching almost 220,000 people (which exceeds the… Mai mult

181 magistrates sign a criticizing letter addressed to Minister of Justice

The Minister of Justice stirred up the fury of magistrates. 181 prosecutors and judges sent him a letter criticizing Tudorel Toader for his statements about… Mai mult

Canada takes over air-policing missions operated from Mihail Kogalniceanu base

MApN announced on Wednesday that Mihail Kogalniceanu Air Base 57 had a ceremony occasioned by the handing over of the Enhanced Air Policing between the… Mai mult

Ministry of Finance is drafting a new fiscal framework valid as of January 1, 2019

The Ministry of Public Finance makes a "comparative analysis" of the Tax Code and the Tax Procedure Code with a view to applying a new… Mai mult

Eurostat: Romania and evolution of employee number in public sector in an European context

Romania, Hungary and Slovenia are the member states that recorded the largest increase in the share of public sector employees in the total number of… Mai mult