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Drawing European funds - a solution for the construction sector

Recently, the National Forecast Commission (NFC) - an institution subordinated to the Romanian Government - reviewed the data included in the document called "Projection of the main macroeconomic indicators for 2012" according to the new economic realities. Thus, as regards the evolution of the Gross Domestic Product (GDP), a real growth of 1.7% is estimated for the current year, slightly lower than the 2.5% growth recorded in 2011. At the same time, the main increase of the gross value-added (GVA) will be recorded - as a first since the end of recession - by the construction branch (+2.7%), a sector followed by the industrial one (+1.9%) and services (+1.1%), while agriculture will be the only sector to record a stagnation (0%). Forecasts are actually in line with the estimations made by the Executive power and the main international partners (IMF, World Bank and the European Commission).
 
Although the respective information can be labelled by the sector market operators - much more connected to the real economy than the state institutions - as much too optimistic or even hazardous, upon a closer analysis we can notice that the problems generated by the sovereign debt crisis in the euro zone (mainly with Greece as the focus of world investors’ attention) have had so far a much lower impact on our country than what most analysts had previously reiterated on various media channels. At the same time, the national currency depreciation as against the Euro could represent a positive factor for exports, considering that big construction entrepreneurs in Romania, with a high competition potential to face international challenges, consider ever more often the option of carrying out part of their activity on foreign markets. Back to the NFC estimations, the institution experts state that "the GVA increase in constructions is mainly based on the production indicator growth by 2.5% in 2012, after last year this chapter recorded a 2% growth. On a medium term, according to the projection of the main macroeconomic indicators for the timeframe 2012-2015 (the spring variant, published at the beginning of June 2012), the GDP is expected to have a positive evolution, thus: +3.1% in 2013, +3.6% in 2014 and +3.9% in 2015. As of 2013, the constructions market will become again the main national economy driver, the GAV index being to successively grow until 2015, by +4.3%, +5% and +5.1%, based on a production growth (+4.3%, +4.9% and +5%)". By noticing the percentage changes as against the previous 12 months, the estimated volume of construction works, per structure elements, reveals for the entire reference timeframe (2013-2015) an accelerated dynamics of capital repair projects (+7%, +6.5% and +6%), while new construction works will evolve at a slightly slower pace (+5%, +6%, respectively +6.5%), being however followed by maintenance and current repair procedures (which ensured the survival of specialized companies in a period of maximum economic crisis intensity), as NFC estimates they will grow by +1.5%, +2% and +2.5%. If we analyze the main construction types, the institution experts claim that, for A category (buildings), growths will reach +2.5%, +2.7% and +3%, out of which +0.5%, +1.2% and +2% for residential buildings, respectively +3.6%, +3.5% and +3.5% for those with a destination other than housing. In its turn, the B category - engineering constructions - mirrors an even higher successive progress, namely +6%, +7% and +7.4%.
Structural and cohesion funds must be brought to the executive power’s attention
In order for the NFC forecasts to come true and be followed by a timeframe of economic growth on sustainable basis, even if the current conditions reveal uncertainty, between 2014-2020 Romania should have a 100% absorption degree, as shown by the President of the Bucharest Stock Market, Lucian Anghel. In his opinion, "as part of the negotiations for the financial year 2014-2020, our country should focus on fully drawing structural and cohesion funds, which have the highest impact on economic growth. A 100% absorption level of European funds could lead to a GDP growth/ per capita expressed at par with the 65% purchase power of the EU-27 average in 2020, from 46% in 2010. This could be considered a minimum level of real convergence for adopting the single currency - EUR. At the same time, the quality of capital inflows represented by European funds is clearly superior to other types of foreign or local capital (foreign direct investments, budget investments from domestic resources etc.). An estimation of the impact of total absorption of structural funds on the Romanian economy between 2021-2025 reveals a slight acceleration of economic growth, due to the inflow of European funds between 2014-2020, which may stimulate total productivity. Thus, in case of a 100% absorption level between 2021-2025, the average economic growth may be accelerated up to 4.8% (as against the 4.4% in 2014-2020), and if the absorption level is 80%, the average economic growth may reach 4.6% (as against the 4% between 2014-2020). In case the absorption level is 60%, the average economic growth will be 4.4% (as against 3.6% between 2014-2020)". Another beneficial factor of full absorption could be represented by the creation of approximately 200,000 new stable jobs by 2025, mainly concentrated in sectors with high value added (processing industry, services etc.).
Romanian construction market - ranking first in the top chart of sequential drops
The emergence of the first signals indicating an ascending trend of the EU-27 construction market in March 2012, after certain periods of sequential regress in September, October and December 2011, respectively in January and February 2012, was recently reported by the specialists of the European Statistics Bureau Eurostat, in a study analyzing the situation of seasonally adjusted output in 14 of the 27 countries making up the community space. "The EU-27 construction sector recorded an 11.8% appreciation in March 2012 (and +12.4% in the euro zone), the data being adjusted seasonally as against the 29 previous days. We have to mention in this sense that - as it happened lately - the information on the previous period was reviewed as against that issued in release no. 58/2012, from 18 April 2012. Thus, indicators for February 2012 were recalculated from -7.1% to -10.4% in the euro zone and from -3.7% to -5.7% in EU-27. At the same time, estimated annual rates accentuated their negative trend, changing from -12.9% to -16.3% in the euro zone and from -9.4% to -11.6% for EU-27, which means that there are no favourable premises, all forecasts indicating a worsening of the new recession effects, generated by the sovereign debt crisis, in the European construction sector. Back to the situation recorded in March 2012, if we consider an annual comparison basis, the 3.9% drop of construction works volume in EU-27 or the 3.8% drop in the euro area (as against March 2011) indicates that, against the background of an increasing application speed of intense austerity programs, at the same time as a deterioration of the political - social situation in certain countries (such as Greece) or generally, the market problems have worsened as against the situation of the similar timeframe from the second recession year, investors manifesting considerable reticence to contracting specific investments and expressing their aversion to risk.
 
Article published in the May/June 2012 issue of the AGENDA CONSTRUCTIILOR Magazine. For detailed information click here!

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