2020 Country Focus: Romania
Romania – brief economic review
For Romania, the financial data for 2020 show that the economy contracted 10.5% on an annual basis in Q2 versus the Q1’s 2.4% growth, as Covid-19 lockdown during March-May and the subsequent containment measures influenced the businesses heavily.
Private consumption plunged 13.3% annually in Q2 due to lockdown measures enacted at the end of March, the worst historical result. Public spending growth accelerated to 4.7% (Q1: +3.5% y2y) as the Government deployed various stimulus measures, including employment support schemes and tax relief (Source: Focus Economics).
Most analysts see the GDP this year contracting 4.6% to 6%, while next year, it is expected to rise 4-5% in a flat V-shaped recovery.
Besides the pandemic, more other significant events (both negative and positive) occurred or will occur this year in Romania, adding to the volatility of the environment:
– Local and Parliamentary elections in December;
– An overall bad agricultural year due to exceptionally severe drought;
– Enacting of controversial welfare measures regarding significant pensions and children indemnity increases, which put tremendous pressure on a budgetary deficit of already more than 8%;
– Including the Romanian stock market into the emerging-markets category by FTSE Russell, with a potential for more foreign investment inflows.
The Trade Credit market
Helped by governmental measures, the B2B trade and payment climate showed resilience despite the crisis, with more payment notifications but no significant increase in insolvencies.
Local trade credit insurers saw the same level of business as last year, on the one hand, driven by the increased perception of risks by customers, on the other hand, hampered by the uncertainty affecting business volume estimates and, accordingly, budgets.
As expected, underwriters avoided the hardest hit sectors as travel, retail, automotive, and HORECA; however, the construction sector (especially residential, industrial, and infrastructure) became the star of the Q2 period.
All local insurers showed flexibility during pandemic times by struggling case-by-case to maintain limits as high as possible, so we registered no major discontent among our customers.
As a development to follow, currently, there are talks underway between the Romanian Government and the trade credit insurers regarding an exposure guarantee scheme, which will give a potential boost to this insurance line.
Renomia SRBA provides credit insurance solutions to all kinds of players on the Romanian market: multinationals (primarily through our partnership with Astreos), prominent local companies, but also SMEs.
We see the trade credit insurance as both an essential business risk cover and a competitive advantage in a volatile market. Therefore we continuously strive to find the best solutions for our customers by studying their specific needs and debtor portfolio, getting the best coverage from as many insurers as possible, and crafting the final policies according to the development objectives envisaged.
Our team consists of:
Gabriel Orsa, Head of International Business – more than 25 years of experience in the insurance field, mostly in managerial sales positions with Allianz and Uniqa.
Bogdan Mateescu – Senior Broker, member of International Team – 5 years of insurance experience, 15 years of working with companies as a banker.