Builders say only an annual growth of 8% to 9% of the construction sector could help it contribute to the gross domestic product increase.
Infrastructure works went down 1.9% last year, as the entire construction sector saw 1.6% decline in 2013, according to the National Statistics Institute.
The reduction in the volume of infrastructure works is a direct consequence of the drop in public sector investments, which fell 7.5% last year, while public sector staff spending went up by about 13.5%. Moreover, the national company in charge of highways and national roads, CNADNR, one of the main infrastructure contract providers, moved from the Transport Ministry to the Department for Infrastructure Projects and Foreign Investments run by Minister Delegate Dan Sova.
Total construction works declined by about 25% in 2013 compared with 2008, while infrastructure works fell by about 8% during the same time, ZF has calculated based on National Statistics Institute data. The growth of infrastructure works peaked in 2007 and 2008 when it reached about 32% and almost 28%. Another two years of growth, though much lower, were 2011 and 2012, 0.8% and 9.7%, according to statistics institute data.
Laurentiu Plosceanu, chairman of the Romanian Association of Construction Companies, ARACO, believes 2011 and 2012 were not exactly good years because the growth was “tentative, brought about by circumstance”.
“We hoped we would see an exit from the crisis in 2013, but last year came with a downward trend. One of the main reasons for that was the indecision of the government, the budgetary corrections that had a negative impact on projects and the suspension of the EU fund programs (mainly the SOP-T, which meant infrastructure funds for Romania, which was frozen until mid last year i.e.),” Plosceanu said.
“The construction sector needs growth of 8% to 9% a year to a minimum of EUR10 billion to (…) start contributing to the economic growth.”
Construction market amounted to EUR8.5 billion to EUR9 billion last year.
“This money must not come from public funds only, but also from public-private partnerships or private funding. Economy cannot grow year after year on the back of agriculture alone. Moreover, one construction job creates three in the related industry.”
According to the information provided by ARACO last year, public sector contracts, especially for infrastructure works, make up about 90% of the construction market.
The infrastructure sector that should have contributed to a growth of the entire construction sector during the crisis was frozen in 2013 due to the suspension of EU funds until midyear.
Allocation of funds for infrastructure works is also uncertain in 2014, so construction companies do not yet know what projects they will work on this year.
“We hope construction works will remain at least at the 2013 level in 2014. We depend on the local or central budgets that have not been approved in full yet,” said Florea Diaconu, a businessman who owns builder Delta ACM 93, which posted EUR115 million to EUR120 million revenue last year.
“We have almost EUR100 million worth of contracts signed in Romania, but do not know what funding will be available yet.”
Neither the Department for Infrastructure Projects and Foreign Investments, nor the Transport Ministry had provided an answer to ZF’s questions about the decline in infrastructure works last year by the time the story was ready for posting.
According to the 2014 budget draft, the government will allocate a total budget of 13.9 billion lei (EUR3.08 billion) to road infrastructure (highways and national roads), railways, airports, waterway infrastructure and subway, 5.6% more than the budget CNADNR and the Transport Ministry got in 2013, according to ZF’s calculations.
Neither institution had provided any information about this year’s budget and projects by the time the story was ready for posting. (EUR1=RON4.5101)
(English version by Loredana Fratila-Cristescu)