Politics and crisis hit Romanian construction

The latest report from PMR market research shows the construction industry in Romania contracted by -15,1% during 2009. The decline follows growth in 2007 and 2008 of +33.6% and +26% respectively.

The report attributed the contraction to an overall economic deterioration coupled with a continuous political crisis, which resulted in a -12% reduction in infrastructure development during the year.

Report author Robert Obetkon said, "Infrastructure construction was falling short of expectations even before the global economic crisis. This area of the industry has suffered as a result of the government's lack of experience with large civil engineering projects as well as numerous court cases and political clashes over such projects."

Mr Obetkon also said that funding remained an issue and was given as one of the reasons for the April withdrawal of the Vinci-Aktor PPP consortium that won a 30-year concession contract to construct a € 2 billion motorway linking Bucharest with the central and western regions of the country.

Beyond infrastructure, the report said that all three major subdivisions of the construction market suffered as a result of the economic downturn. "Following rapid growth between 2006 and 2008 construction in the non-residential sector declined steadily during 2009 with developers putting most of their plans on hold during the year," said Mr Obetkon.

Residential construction also saw earlier rapid growth come to a halt in 2009 because of consumer insecurity and dwindling purchasing power.

Despite the downturn the report concludes that in the medium to long term, Romania remains one of the most promising construction markets in Europe. Mr Obetkon said, "The per capita area of residential and commercial properties is relatively modest in comparison to other EU states and the country's infrastructure is underdeveloped and in need of sizeable investment.

"Substantial funds are available from the EU, but the Romanian government has to learn how to use them effectively. This process took several years in the countries that entered the EU in 2004 and I expect a similar development can be expected in Romania," he said.