Impact of the COVID-19 Epidemic on the Romanian Business Environment

Our study about the Impact of the COVID-19 Epidemic on the Romanian Business Environment shows the situation of the private enterprises in our country. According to it, as of late April 2020,

• 91% of the companies felt affected by the Coronavirus epidemic, with an estimated average impact of -10.2% for 2020.
• 95% of the companies had undertaken measures in order to survive the crisis caused by COVID-19, while 90% had taken them right at the beginning of the emergency state.
• The historical and forecasted evolutions are significantly correlated. Specifically, if a company was in a downward trend in 2020yoy2019, the estimated evolution for this year is estimated to be, consequently, in decline.
• Business representatives are rather skeptical about state institutions managing the COVID-19 crisis. The confidence level is low, of only 2.7 points out of 7.
• The authorities must prove to the business environment representatives that they can handle the current crisis. Instead, the business environment representatives will become more confident in their organizations’ evolution, after the pandemic period.
• Companies want a strategic approach from the state, from which they expect to guarantee for the private environment, by exemption from paying taxes, on the one hand and through investment support, on the other.

MKOR Consulting continues the series of its in-house studies in the context of the coronavirus epidemic, which presents the market situation up-to-date. Through that we want to offer tools for the clients, academic environment and anyone who is interested in being updated with the ways the new virus affects our lives.

We hope that you find the new MKOR study useful and helpful in taking more informed decisions!

The Impact of the Coronavirus Epidemic on the Romanian Business Environment

91% of the companies feel affected by the Coronavirus epidemic, with an estimated average impact of -10.2% for 2020. This is a forecast somewhat more pessimistic than than given by the European Comission, of -6% for Romania, în 2020.

The estimated average impact is 100,000 Euros, up to 100% of the turnover. The more pessimistic the companies representatives are, the higher the average estimated impact.

The most noticeable effects of the COVID-19 epidemic are turnover reduction and temporary activity suspension, whether it is related to business-as-usual activities or forthcoming events.

At the time the survey took place (late April), almost 1 out of 10 large organisations were not affected in any way by the COVID-19 epidemic.

Micro enterprises tended to be the most affected by the consequences of COVID-19 epidemic. However, they were less sensitive to the effects of employees’ unavailability, probably due to their small number of employees, in general.

Measures Undertaken by Romanian Companies

95% of the Romanian companies had undertaken measures in order to survive the crisis caused by COVID-19, and 90% undertook them right at the beginning of the emergency state.

The most frequent measures were of financial nature, meant to protect the cash flow on a short and medium term, followed by measures for employees protection and business pivoting.

However, some measures had been postponed until the summer, depending on the short term general evolution. This means that, in the absence of at least slight signs of economic recovery, we could be witnessing new sets of measures at the end of the second quarter (Q2 2020) and beginning of the third (Q3 2020), meant to extend the organisations’ operational continuity.

On average, during the COVID-19 epidemic, Romanian companies have taken an average of 3.5 measures, regardless of their type. The most cautious organisations were the ones in the FMCG sector, with a record average of 6.5 implemented measures. Similarly, companies in industries like Consulting, Automotive and Tourism, have taken an average of 4.5 measures to keep the operations going during and after the quarantine was imposed.

12% of the organisations took into consideration reducing the salaries, with an average cut of 37%.

Romanian Economic Context as of the 1st of March 2020

On the 1st of March this year, the market evolution tendency was showing an upward trend, compared to the same period of 2019.

Romanian companies have a regular distribution in regard to forecasted evolution for this year. However, most organisations tend to be rather pessimistic, estimating negative evolutions until the end of 2020.

That is because the historical and forecasted evolutions are significantly correlated. Depending on their situation as of 1st of March 2020 (YoY 2019), companies were leaning to be either optimistic or pessimistic. Thus, the companies that were on an upward trend estimates gains for 2020, contrary to the ones that were on a downward path last year, who expected a loss for 2020.

In the case of the current social distancing protraction, Romanian companies estimated only a short term survival (i.e., 6 months tops, for 65% of them).

At the same time, over one third of the organisation were stable enough to surmount a medium and long term extension of the state of social isolation.

Micro and medium enterprises were the most vulnerable in front of a prolonged general quarantine situation. Two thirds could resist 3 months at most, in the current conditions (as of late April 2020). The larger a company, the higher its resistance in facing the emergency state longer than a year.

Trust in Authorities

Romanian business representatives are rather skeptical about state institutions managing the COVID-19 crisis. Their confidence level is low, of only 2.7 points out of 7.

72% of the respondents show a low confidence level (1 to 3 points out of 7), 25% average level confidence (4-5 out of 7) and only 4% seem really confident about the way the government is handling the COVID-19 crisis.

The most concerned are micro enterprises representatives (2.4 points out of 7), whereas medium enterprises are the most trustful (3.4 points out of 7).

The trust in authorities is one of the factors that directly influences the optimism of the Romanian companies, as the two are correlated.

In other words, the authorities have to prove to the business environment that they can manage this crisis. In return, business representatives will become more confident in their own organisations evolution after the pandemic passes.

Depending on the way companies relate to authorities and their own evolution at the end of 2020, three distinctive groups of organisations stand out: Pessimistic, Reserved and Optimistic (more details in the report).

Measures Undertaken by the State

Companies want a strategic approach from the state, from which they expect to financially help the private sector, either by tax reductions, or investment support.

Companies also think that the state has to take a moderate number of measures in order to support the private sector, irrespective of their nature. The most popular are temporary tax reductions and exemptions, and state aid for investment support after the pandemic.

Medium and larger companies tend to have higher expectations from the authorities to extend the aplicability of technical unemployment.

About The Impact of the COVID-19 Epidemic on the Romanian Business Environment Study

Methodological specifications

The survey was conducted in April 2020 on a sample of 243 private organisations & NGOs from Romania.

Sample structure: 89% entrepreneurial businesses; 5% multinational companies; 2% NGOs and 4% others. By the size of the company, there were 67% microenterprises, 22% small enterprises, 8% medium-sized enterprises and 3% large enterprises.

👉 Note: This report was written at the beginning of May 2020, after the announcement of cancelling the state of emergency starting from 15th of May. Still, the data in the study has to be understoodnin the context of its collection, when the perspective of lifting some of the strict measures was not made public.

Special Thanks to Our Partners for This Study

This study has reached so many decision makers in Romanian organisations with the help of our partners, which have promoted our endeavour in their communities.

We’d like to thank: Autism Voice, Bizi Live, Bülent Duagi, Carta Diversității, Just Ideas, Lorand Soareș-Szasz, OTP Leasing, Vision12.

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