Dissolving Dreams: Breaking Records for All (the Wrong) Reasons
2025 marks a bleak chapter for Romania’s economy. A number of structural and cyclical factors are responsible for a slowdown, including a 1.7% decline in gross fixed capital formation (investment) in 2024 (the first since 2020), a negative net foreign demand contribution brought on by a 3.6% year-over-year drop in exports and a 3.4% increase in imports, as well as a loss of momentum in important industries like construction following the most recent governmentally imposed austerity measures.
At a modest 0.9% economic growth in 2024 – the slowest after the years of the Covid-19 pandemic – numerous companies have faltered. 46,205 businesses have been dissolved in 2024 alone, an 18% increase over the previous year and the highest since the 2008 financial crisis. This indicates a deteriorating climate for doing business, so no wonder that foreign direct investments (FDI) in Romania experienced a 14-16% decline last year (inflows reaching around EUR 5.7 billion vs. EUR 6.6-6.7 billion in 2023). The number of jobs created by FDIs has also dropped 31% compared to 2023.
So, one might wonder, what about market competitivity? It’s not different than in sports: up to a certain level, the higher the number the teams playing in a league, the more attractive and competitive the league is. But with just seven teams competing for the national championship, that risks being lost in anonymity.
Political instability and fiscal austerity measures have diminished business sentiment and private sector expansion, while fiscal imbalances with a government deficit near 9.3% of GDP in 2024 further reduced economic confidence and hampered investment climate. The ongoing (and on-growing) inflation – 9.9% in August 2025 – has eroded purchasing power and squeezed profit margins with rising costs for energy, raw materials, and logistics. Add to this the tax havoc waged on small businesses and then you have the backbone of Romania’s business ecosystem – the SMEs – being pushed to the brink of insolvency. About 12,700 companies were dissolved in the first quarter of 2025: a 3.8% increase compared to the same period last year. No sector was spared from the scythe, whether we talk about wholesale and retail trade, agriculture, information and communication, professional activities, or constructions.
New rules targeting inactive companies were imposed in 2025. These require firms inactive for over one year to reactivate within 90 days or firms inactive for three years to reactivate in 30 days, or they will else face insolvency, liquidation or dissolution procedures; also, companies without Romanian bank accounts or those persistently late in submitting financial statements also face legal forced dissolution (Popa, 2025). Yet, it has to be noted, that such measures have been adopted over a growing number of so called living dead or zombie firms: companies which only survive by accumulating debt and simply continue their operations with the help of external support. The earnings barely help them pay some interest, yet not enough to make investments in R&D or growth, thus ending up in persistent low profitability and productivity. So, to a certain extent, we can talk about a cleansing of the market of ghost companies.
The economic situation isn’t good, no matter what, ghostly or not. Without a cautious optimism based on clear and sound policy intervention, Romania faces a significant risk of entering a recessionary spiral to which the country is not a stranger. We have witnessed similar episodes starting with 2007-2008, yet none seemed so bad as what is going or might go on now, on the background of a fragile trade balance and austerity measures. Volatility, bureaucratic inefficiencies, and slow digital transformation hold back even more private investment, innovation, and competitiveness. If 46,205 were dissolved in 2024, one might fear the 50,000 mark will be crossed this year. What’s coming up behind us is another question. We’re sort of fed up with shaormerias, and kind of soaked to the skin from car washers. True added value innovation is needed more than ever.
Reference
Popa, S. (2025). Romania: Legislative update – important changes for companies. Schoenherr. Available at: https://www.schoenherr.eu/content/romania-legislative-update-important-changes-for-companies.
