Loan insurers expecting greater SME insolvency

Local subsidiaries of worldwide operators for loan and collateral insurance, Euler Hermes and Coface, warned that the depreciation of the RON and higher inflation are likely to have a negative impact on the ability of local companies to pay their interest rates.

"The evolution of the two indicators is not likely to improve the productivity of companies, especially small and medium-sized ones. We are expecting a higher insolvency ratio among small and medium-sized enterprises (SME),” Euler Hermes Servicii Financiare (EHSF) General Manager, Cristina Rusuleanu, told Business Standard.

Coface Romania's General Manager, Cristian Ionescu, agrees that the ability of companies to pay interest could worsen. "In the short-run, however, we are not expecting a worsening, as long as the economic environment does not deteriorate further," Ionescu said. He added that the number of insolvencies rose by 50 percent in the first half of 2007. "Two of Coface's activities, insurance and debt collection, show that there are delayed payment sent to us for resolution," Ionescu said.