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August 13, 2022

Domestic constructions sector still in critical condition

The Romanian constructions sector continues to be in a critical situation, mainly because of low demand and of fragile financing support from the baking sector and from foreign and government investments, a Coface study shows. “This sector’s recovery outlook is cautious, bearing in mind the growing difficulty in contracting forex-denominated loans. Thus, according to the new National Bank of Romania (BNR) regulations that will come into force in February, a down payment of at least 25 per cent will be needed for EUR-denominated real-estate loans and one of at least 40 per cent for loans denominated in other currencies, consumer loans will have to be reimbursed in less than five years and guarantees amounting to at least 133 per cent of the borrowed sum will have to be given,” a Coface communiqué reads. Analysts note that this sector experienced significant adjustments against the backdrop of the financial crisis, adjustments that led to a drop in the number of companies and in activity.

“The only positive signs are those seen in comparison to the rest of EU member states. Thus, in November 2011 Romania registered the highest growth in the volume of construction works in the EU, compared to the same month last year, the growth amounting to 16.9 per cent as a gross series and 14 per cent as an adjusted series,” the communiqué reads.

According to Coface, the construction companies’ situation closely reflects the global, regional and national economy trends. At the same time, in a moment in which the world economy is characterized by disagreements bet­ween countries and by Euro Area recession, there are significant differences between countries and subsectors.  The fragile and changing economic climate, combined with changes in public sector orders, changes in regulations, demand fluctuations and fluctuations in the cost of materials, explains the hike in the number of payment incidents registered in the first months of the 2008 crisis and since October 2011, the afore­men­tio­­ned source reads. In Eu­rope the construction sectors will depend on the austerity plans in 2012. After a three-year decline and a 17 per cent drop in activity, the European construction sector almost stabilized in 2011, especially in the residential subsector, despite differences between European countries.

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