Since the beginning of the pandemic, insolvencies and restructuring processes have been low in the countries of Central and Eastern Europe (CEE), with the exception of Romania, which has seen an increase in insolvencies, and the Czech Republic, which has reported an advance of the restructuring activity, according to PwC, according to Mediafax.
According to PwC’s Global Restructuring Trends report, the insolvency rate is expected to rise globally by the end of this year and next, especially among companies in industries severely affected by the health crisis, such as tourism, transport or non-food retail. The industries that remain under pressure in the CEE region are automotive, non-food retail, tourism and hospitality.
“To date, both insolvency rates and restructuring pressures have generally been kept under control by government intervention through measures such as tax arrears, loan guarantees or technical unemployment. But these measures are applied for a certain period and, once they cease, the number of insolvencies is expected to increase. This is why, in order to be more likely to survive, companies must consider strategies to reconfigure plans and operations before governments withdraw their support. Some companies have already initiated restructuring plans since the last quarter of 2020 and it is expected that this activity will intensify in the first quarter of 2021 “, said Dinu Bumbăcea, Partner and Leader of Business Consulting Services, PwC Romania.
In the case of Romania, the number of insolvencies was increasing in 2020, according to the data of the National Office of the Trade Register. Thus, the number of insolvent entities rose from 1,392 in April this year to 4,606 in October. However, the number remains below the value recorded in the same month last year.
Restructuring can play a key role in supporting business and reducing the number of potential insolvencies and keeping unemployment rates low. Currently, more than 40 million employees in 37 global economies are technically unemployed, and forecasts are not very optimistic.
Since the beginning of the pandemic, companies have focused primarily on maintaining liquidity through the use of government support measures, as well as reducing costs and stabilizing supply chains. From now on, it should also focus on debt management accumulated during the period of downtime, financial restructuring, consolidation and divestment of non-core assets.
In its third edition, the Global Restructuring Trends report examines how governments and companies have reacted to the economic impact of the COVID-19 pandemic and presents the challenges ahead in 37 economies around the world.
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