Cristina Chiriac, president CONAF: “Entrepreneurs can no longer afford the cost of a new lockdown”

Opinion by Cristina Chiriac, president CONAF

The COVID-19 pandemic has seriously affected the Romanian economy; therefore, the companies claim that they will not be able to withstand another lockdown. The first lockdown, instituted in the spring of 2020 by the authorities, resulted in a strong impact not only on social life, but also on entrepreneurial activity. We all agree that physical distance is necessary and imperative for the health of the entire community. Equally, we must recognize that this measure has a side effect in the business environment, devastating in some places, manifested on many businesses that relied on interaction with the public to operate. From hotels to restaurants, from small clothing and gift shops, to florists, beauty salons and dry-cleaning services, companies have had to postpone their usual strategies and find counter-timers. new survival solutions. Some have succeeded, some have not!

In April 2020, the Romanian business environment registered a drastic decrease in terms of entrepreneurial initiative, compared to the same period last year, the number of business establishments reaching the lowest level in the last 5-10 years (Source : National Trade Register Office). Since the start of the current crisis, which has severely affected the business environment, 22.5 billion euros have been lost from the company’s turnover, one million people have gone into technical unemployment and 35,000 companies in the HoReCa industry are closed. In March 2020, the COVID-19 crisis strongly affected entrepreneurial initiatives, regardless of their legal form (SRL, PFA, II, etc.), registering decreases of up to 74% compared to 2019.

According to the study “How did Romanian companies manage in 2020”, conducted by the Association of Risk Professionals, the most affected businesses were those in the industry of cultural and recreational shows (37% decrease in turnover), hotels and restaurants minus 35%), extractive industry (decrease of 21%), followed by education (minus 17%), processing industry and the transport and storage sector. If we look closely at the figures, the same study indicates that the largest contributors to the state budget have recorded significant losses in turnover.

In terms of the evolution of SMEs, they have seen a significant slowdown in growth. In 2019, SMEs registered a business increase of 30%, while last year they were down 46%. If in the case of large companies the evolution on the above industries indicates decreases below 50%, the same does not happen in the case of SMEs, which had losses of 60% or even 80% in the case of the textile industry.

The SME sector was one of the most affected sectors during the crisis, both in Romania and globally. This has led the governments of the world’s states, including Romania, to take urgent measures to keep them afloat. According to official statistics, in Romania, three out of ten companies are at risk, with higher expenses than revenues (Association of Financial-Banking Analysts), totalling 850,000 employees (one-fifth of the total number of employees in the private sector). During all this time, in the public administration and defence, the number of employees increased during the pandemic period by 42%. If we look at the data of the Ministry of Public Finance, in August 2021, the number of positions amounts to over 1,230,000, of which in the central public administration about 780,000 and in the local a little over 450,000.

The massive loss of jobs has exacerbated global inequality, with women, young people and informal sector workers being the hardest hit.

The UN Agency for Labour and Social Security estimates that globally, thirty million new jobs could have been created without the pandemic. Instead, many small and medium-sized companies have gone bankrupt or are facing difficulties that threaten their existence on the market.

Cristina Chiriac, president of CONAF, said: “Unemployment does not show the impact on the labour market. The real impact, much harder, was the reduction of the work schedule in most businesses as well as the dismissals due to the restriction or closure of the activity during the pandemic period. Entrepreneurs are tired of keeping their business alive. Although the macroeconomic economy is growing exponentially, at the micro level, Romanian companies are in a much worse situation than in the previous crisis, the debts reaching the highest level in history, and no one knows how they will be paid. All these things will explode in the coming years because there is, economically speaking, a gap of two years between a crisis and when the effects begin to be seen. As a result, I encourage the Romanian Government to take firm measures to avoid a new lockdown. The Romanian business environment and society as a whole can no longer afford to bear the cost of a new lockdown that would affect the economy. In the first part of 2021, the Romanian economy has recovered from the loss of 2020 and it is in everyone’s interest to be initiative-taking in maintaining this trend of return to normalcy. I think that the acceleration pedal of vaccination must be pressed, the only scientifically validated method that can protect society and that is in a relationship of interdependence with the health of the Romanian economy ”.

The problem in the pandemic period is still the labour force. The loss of jobs due to the pandemic has destroyed “five years of progress”, a new UN report points out. Unfortunately, experts do not expect the situation to be remedied too soon.

Ninety-five percent of companies took measures to survive the crisis caused by COVID-19, and 90% took them immediately after the start of the emergency. The most common are financial measures, which protect cash flow in the short and medium term, followed by measures to protect employees and measures to pivot the business.

Two out of ten SMEs that closed in Romania at the beginning of the pandemic remained closed after 6 months, compared to a share of only 13% in the case of large enterprises, according to a study conducted by Mastercard in nineteen countries, which shows that small businesses are three times more likely to remain closed than larger businesses.

Romania, like the rest of the world, is 19 months after the first wave of the COVID pandemic, which led, in March 2020, to the decree of the first states of emergency, to the first drastic measures to limit interactions, to the known quarantine now around the world as a “lockdown.” After 19 months, the authorities have no excuse for a new and still unexplored situation, have seen appeals, public or legal, have benefited from the experience of others and have had enough leverage to intervene.