Updated on: 23 March, 2021
What’s the current situation?
Since the start of the COVID-19 pandemic the total number of confirmed Covid-19 cases in Romania has reached 926,310 as of 26th of March 2021 (of 5% of the total population). Since the beginning of March 2021, the number of COVID-19 cases has risen significantly after some period of steady growth in December 2020 – January 2021. Following the increasing trend of infections since the 26th of March 2021, Romanian authorities have introduced tighter restrictions in an attempt to limit the spread of the virus. Night curfews are in force in the whole country. Besides, combined models of stricter measures have been introduced in areas with higher incidence rates of COVID-19 cases. Romania started its vaccination campaign on the 27th of December. So far, 978,528 people have been vaccinated with the first dose, while 883,118 people have received both doses of a coronavirus vaccine.
The Government has extended the state of alert in Romania for another 30 days. During the state of alert, the measure of mandatory facemasks in indoor public spaces, commercial spaces, public transport and at work is maintained. As well as social distancing. Also, it is forbidden to organise public events and gatherings and the cafeteria and restaurants remain closed. The restrictions will be lifted gradually every two weeks, depending on the epidemiological evolution.
The protracted COVID-19 pandemic has seriously affected Romania’s economic activity and household incomes in the short-run. The economy is expected to shrink by 5.7% in 2020, on the back of a slow recovery of manufacturing and a poor agricultural year. Poverty is anticipated to increase, as the impacts of COVID-19 affect domestic income sources, and lead to contractions in remittances, while a drought affects farmers.
In January 2021 Romania’s industrial production volume grew by 0.9 % year-on-year, following a 1.6 % rise in the previous month. It was the fourth consecutive month of increase in industrial output, during the pandemic. On a monthly basis, the industrial output showed no growth in January 2021, after a 0.9% gain in December 2020.
A proactive but constrained fiscal response supported firms to retain employees and fed into household incomes. However, the sharp decline in output led to deteriorating labor market conditions, with deeper effects noted for younger workers and women: job vacancies fell between Q1 and Q2 2020 while the unemployment rate increased to 5.4% in July, from 4.1% in February. Job and household income losses were stemmed from the technical unemployment relief program, which covered 1.3 million beneficiaries during the state of emergency at a cost of approximately EUR 370 million (0.2% of GDP).
The positive aspect is that the increase in the unemployment rate is slowing down. It appears that more men are unemployed than women. A peak in job insecurity was reached during the lockdowns when about 15% of employment contracts were suspended and 4% were terminated.
The number of people in technical unemployment started to decrease after May 2020, when the economic activities re-started step by step. After June 2020, the total number of suspended contracts did not overpass 300,000 and by end of 2020, only 244,000 persons were registered in technical unemployment. Most of the furloughed employees are from the manufacturing sector; around 30% of the total. Other affected sectors are constructions and commerce.
The situation with factory production
The textile industry in Romania has been affected since the start of the pandemic in China, with delays in providing raw materials, as China was the main supplier for accessories and material. Once the factories in China were closed, many brands/retailers moved the production to Turkey
Media report that during the state of emergency, a stagnation in production was noted and the textile sector was severely affected by the impacts of the COVID-19 pandemic. Romania’s garment manufacturers are pessimistic about the future of their business. The article reports that about 40% of orders were lost last year and that they are still far from recovering these losses, as factories still lack new work orders. According to the Employers’ Federation of the Textiles, Clothing and Leather Industry (FEPAIUS), garment factories across the country are only receiving about 20% of their usual number of orders. As a result of all these impacts, at least 40% of garment workers in Romania have been laid-off.
There are reported difficulties in the supply of raw materials and accessories both because of the decrease in transport on the route Romania-Italy, China, and as a result of the suspension of the activity of many Italian producers. Romania’s exports to Italy amount to 4.7 billion lei, while imports are 6.3 billion lei.
FEPAIUS points out that orders have been drastically reduced, especially from customers based in Italy, and another effect of the pandemic is that production schedules can no longer be met. This leads to lower production values, due to the impossibility of delivering materials from areas affected by the coronavirus. At the same time, there were higher risks of cancelling customer orders due to delayed delivery times. Delays were also seen in receipts, from 30 days to 45-50 or more. But the worst effect of this pandemic on the textile industry is the impact on the Romanian workforce.
Since the beginning of the pandemic, the factories have not been specifically asked to stop production, but they need to continue to monitor and follow advice and guidance from relevant authorities such as the World Health Organization (WHO), the Ministry of Health (MH guidance), the Ministry of Foreign Affairs (MAE guidance), the National Institute for Public Health (NIPH guidance) and the government (government guidance). The factories could keep up with their work if they have still valid orders and no workers have been infected.
Even after 12 months of the pandemic, and especially after stricter lockdowns introduced at the beginning of 2021 throughout Europe, the factories are still struggling to with the difficult times; uncertain status of orders, lack of raw materials and higher standards for the safety of the workers. Factories are struggling to keep business going and this will be affected by the duration of the situation. Factories are faced with financial losses caused by fixed costs like payment of rent, utilities, state taxes, salaries, VAT, etc.
What are the government policies to support local businesses?
In 2020, Romania has activated EUR 400 million of pre-arranged financial support from the World Bank to help prevent and respond to the Covid–19 pandemic. The financing covered a range of interventions to strengthen health services, minimized losses to both the public and private sectors and safeguarded lives and livelihoods.
Measures to support businesses, including covering the wages of self-employed and workers in danger of being laid off partly, partially subsidizing the wages of those returning to work and deferral of utility payments for SMEs, were implemented in 2020. These measures included:
- Support of payment of technical unemployment, for employees sent into technical unemployment due to the coronavirus crisis. All employers who reduced or interrupted their activity, totally or partially, as a result of the coronavirus crisis, could apply to receive state aid for the payment of the employees in technical unemployment during the state of emergency. Employees received a compensation of 75% of the basic salary corresponding to the workplace occupied, but not more than 75% of the average gross wage forecasted for 2020 – respectively 5,429 lei, according to Law no. 6/2020 of the state social insurance budget for 2020.
- The government has decided to reimburse VAT of up to RON 9 billion (EUR 1.87 billion) to allow companies to benefit from the working capital needed to operate.
- Romania’s support program for SMEs successfully was launched on 28th April 2020, on the second try.
- On July 2nd 2020, a new scheme of financial aid in the total value of approx. EUR 800 million was approved. The support was provided in the form of state-guaranteed loans. The measures were aimed at the small and medium enterprise with a turnover of over 20 million RON in 2019 (approx. EUR 4 million), as well as for big companies.
Economic measures described above mainly targeted the impact of the lockdown, although there is a lack of confidence that the impact will reach vulnerable people, especially those working in the informal sector. Since there was a delay in the adoption of the 2021 country budget, as of March 2021 additional financial measures for business support have not been introduced.
What are the government policies and regulations of to protect employees – the workers?
All employers need to assess the risks faced by their employees and visitors and implement measures to mitigate those risks, paying particular attention to vulnerable staff (such as those who are pregnant, with impaired immunity, on secondment or working away from home). Employers should inform their employees and, where relevant, recognized unions about their proposed measures.
Government regulations to protect employees were adopted on two levels. The first layer of measures was designed to support businesses in ensuring workers’ income regardless of the financial losses of the businesses. Partial contribution by the state (i.e., the state contribute from the unemployment insurance budget an amount up to 41.5% of the average gross salary set out under the social insurance budget for 2020) is valid until 30 June 2021.
- The employer may grant paid days off for one of the parents of children aged up to 12 years (or up to 18 years for children with disabilities), during the temporary closure of the educational units, under certain conditions)
The second layer comprised of the H&S preventive measures issued by the Ministry of Labour and the Ministry for Workers regarding safety in the workplace. In this regard, the following governmental measures have been put in place:
- All the employers who reduce or interrupt their activity, totally or partially, as a result of the effects of the coronavirus pandemic, but only during the state of emergency, were eligible to receive the state aid for the payment of the employees in technical unemployment.
- Employer has an obligation to take measures in order to: a) ensure the security and protection of the workers; b) prevent professional risks; c) inform and train the workers; d) provide PPE (masks, gloves, etc.)
- If a worker suffers from symptoms of Covid-19, a viable solution is to be granted medical leave based on a certificate issued by a family doctor. Another solution would be medical leave for quarantine. This type of leave involves the issuance of a document by the Public Health Department together with the medical certificate from the attending physician.
- The gross monthly amount of the quarantine allowance represents 75% of the income (it is applied to a salary base that represents the average of the gross monthly income for the last six months from the 12 months from which the contribution period is calculated) and is fully supported by the budget of the National Fund of Social Health Insurance.
- Health & safety at work needs to be ensured under the regulations of the H&S law in Romania, Law 319/2006, with updates. The workers must work according to the employers’ instructions, so that they also do not expose themselves to infection and to prevent the exposure of other people that may be affected by their actions.
- For any activity susceptible to present a risk of infection with Covid-19, the employer must determine the nature and exposure level, to establish the required measures, such as: limit exposure, elaborate a plan for emergency measures based on the recommendations of the company’s contracted labour medicine doctor; inform the Public Health Office immediately
The latest recommendations from the Centre for Supervision and Control of Transmissible Diseases are:
- The preventive measures considered as most effective include: frequent hygiene of the hands with hydro-alcoholic substances through friction if hands are not visibly dirty, or with water and soap if the hands are dirty; avoid touching eyes, nose and mouth; practice respiratory hygiene by coughing or sneezing in the elbow, or use napkin/tissues and throw it away immediately; maintain the social distance of minimum 1.5 meter from the persons with respiratory diseases.
- PPE must be used based on exposure risk (as e.g. type of activity) and based on the dynamic of transmitting the pathogen agent (e.g. contact, drops or air). The overall use of PPE will have a supplementary impact on the lack of supplies of PPE.
What are local stakeholders doing to lobby their government?
Employers’ Federation of Textiles, Clothing and Leather (FEPAIUS) has made a series of recommendations for authorities to support the factories in the textile industry:
- Postponing the payment of taxes on wages or even reducing them. Tax exemption and salary contributions for a period of 3 months for those who will be employed during this period in this industry.
- Rescheduling rates from all banks operating in Romania, especially for loans for investments in this industry.
- Extension of the period of technical unemployment from 30 to min. 90 days/
- Reactivating the technical unemployment procedure with funds from the unemployment aid that is currently in surplus would be to maintain the labour force.
- For situations of incapacity to work due to the current coronavirus crisis, the settlement of medical leave should be made entirely by the state without the employer being forced to bear the first five days of each initial leave
- Flexibility to compensate for additional work in the sense of allowing free days in advance without the employee’s agreement and for longer periods of time. At this moment it is possible only to reduce the work schedule from 5 days to 4 days per week, by min. 30 consecutive days. In the case of needing to stop activity, the free days can eventually be compensated with extra work that will be required to fulfil the orders.
- Reactivating the law whereby Eximbank removes 50% of exporters’ interest.
- The pandemic should be considered a force majeure. In the case of total closure of company activity, it should be considered a case of force majeure in relations with third parties.
What are local organisations doing to support and protect workers?
- On 18 March 2020, a multilateral working group involving the government and trade unions agreed a first plan of economic measures for the 30 days of the current state of emergency. This plan includes the following measures:
- Establishing part-time work with the agreement of both parties. The employees will be remunerated in proportion to the time worked or according to the volume of work done;
- In case the work/production needs to be stopped, with the exception of the case of technical unemployment, remuneration is at least 2/3 of the basic salary per established time unit, but not less than the minimum wage;
- In case of temporary impossibility of continuing the production activity by the unit or by its internal subdivision for objective economic reasons, the employer may announce technical unemployment, with the payment of an allowance that cannot be less than 75% of the base salary, but not more than 75% of the gross average wage stipulated by state social insurance budget for 2020;
- Exemption from the payment of social and healthcare contributions for a period of 3 months for employees of companies active in the fields of tourism, transport and entertainment. Normally these contributions are paid by the employee and not the employer;
- For people in quarantine, the payment of the utility bills and the suspension for 3 months of their monthly loan payments to banks will be ensured.
- A consortium consisting of Concordia Employer Confederation, National Council of Small and Medium Private Enterprises in Romania, National Trade Union Block and the National Trade Union Confederation ‘Cartel Alfa’ has signed a joint statement regarding the economic and social crisis caused by COVID 19. They invite public authorities to ensure the right balance between preserving public health by reducing the spread of the virus and keeping economic activity as close to normal as possible.
- National Trade Union Confederation ‘Cartel ALFA’ called for urgent measures to manage the economic and social effects of this unprecedented situation. They request the government to inform and consult the social partners in a timely and appropriate manner, so that they can contribute to guaranteeing the interests of the workers, especially when ad hoc social measures are adopted and considering economic issues that may arise from this crisis.
- Trade unions took part in a government working group which agreed workers will continue receiving two-thirds of their normal wage if they cannot work or are temporarily laid off.
- UNICEF in Romania is developing a series of communication materials dedicated to children, parents, caregivers and professionals working for children. The goal is to help them better protect themselves and their loved ones to prevent the virus from spreading.
What have been the responses and requests of business associations to support the industry?
- Employers’ Federation of Textiles, Clothing and Leather (FEPAIUS) has analyzed the negative impact of Covid 19 and has made a series of recommendations for authorities to support the factories in the textile, clothing, leather and footwear industry (see above). The measures adopted for the private sector are applicable for the textile industry, without exemption.
- Some of the biggest business organizations in Romania and hundreds of local investors, entrepreneurs and managers have initiated a ‘Call for Saving the Economy’ asking the state authorities for an economic stimulus package worth EUR 30 billion, the equivalent of 15% of the country’s gross domestic product (GDP). They warn that the local economy could collapse in the absence of massive state involvement. The appeal is signed, among others, by Romanian Business Leaders (RBL), the National Council of SMEs, the German, Dutch and Belgian chambers of commerce, and business associations in the tourism, hospitality, transports sectors, as well as over 100 of local entrepreneurs and managers. The whole document (in Romanian) is available on the blog of local entrepreneur Marius Ghenea.
- The Concordia Employers’ Confederation and the Foreign Investors Council, two of the biggest business organizations in Romania, have proposed to the government a set of over 100 urgent measures that would help the business environment overcome this critical moment and protect the consumers from the indirect effects of the coronavirus pandemic. They believe that state support measures are needed to prevent blockages or bankruptcies of otherwise healthy sectors or companies, and the state itself needs resources. The whole document (in Romanian) is available here.
What are international brands doing to support suppliers and protect workers?
Brands and retailers are being called on to endorse priorities for action to support the garment industry and protect workers from the impacts of the global crisis.
No specific information on specific actions undertaken by the brands to support suppliers and protect workers were reported.
As retailers have re-closed shops around the world again since the beginning of 2021, garment factories have faced second round of cancelation/delays of orders. This is an alarming rate with devastating impacts for thousands of garment workers. Urgent action is needed to protect their livelihoods during the shutdown and beyond.
Relevant links for more information
Ministry of Health
Ministry of Labour
Guidance to businesses in Romania
Emergency Ordinance 29/2020
Decision no. 217/2020 for the application of the provisions of Law no. 19/2020 on granting parents free days for the supervision of children, in the situation of temporary closure of the educational establishments
Emergency Ordinance no. 29/2020 regarding some economic and fiscal-budgetary measures
The guidance for use of PPE measures can be found here
15 recommendations on social behavior responsible for preventing the spread of coronavirus (COVID-19)
Federation of Employers of Textiles, Clothing and Leather (FEPAIUS)
Covid-19 Romanian Economic Impact Monitor