BNR identifies 17 economic sub-sectors severely affected by COVID-19 pandemic

In its June 2020 Financial Stability Report released on Monday, the National Bank of Romania (BNR) identifies 17 sub-sectors that may be strongly impacted by the economic context generated by the COVID-19 pandemic and a further 17 that may be moderately affected.

The special feature of the report takes a look at the 21st century epidemics and their implications for the banking sector and the real economy in Romania, with a focus on the effects of the COVID-19 pandemic. What distinguishes the COVID-19 pandemic from the other epidemics that hit Romania in the 21st century (bird flu and African swine fever) is both its wide spread and the magnitude of containment measures.

Preliminary data on sectoral activity have shown that 17 sub-sectors may be strongly impacted by the economic context generated by the COVID-19 pandemic, while other 17 may be moderately affected. The sectors expected to be worst hit by the COVID-19 pandemic have a significant importance to the economy. They account for 14 percent of the total number of non-financial corporations, contribute 17 percent to the gross value added and hire 21 percent of the workforce.

According to BNR, these sectors are represented by tourism and the hotel and restaurant industry. In terms of their importance to the banking sector, no significant problems are identified, considering that the exposure to tourism companies is 0.2 percent, to which are added about 3 percent loans granted to companies in the hotel and restaurant industry. However, in terms of importance to economic growth, the hotel and restaurant sector, along with trade and transport, made an important contribution to GDP growth in 2019.

The report also mentions that travel agencies and tour operators represent 0.5 percent of all non-financial companies (3,500 companies), employ 10,000 employees (0.25 percent of the total) and generate 0.6 percent of the gross value added (GVA).

The hotel and restaurant industry is better represented in terms of contribution to the development of the real sector: the number of companies amounts to 5 percent of the total (34,500), the contribution to gross value added is 2 percent, and the number of employees 4 percent (or 171,600).