Uncertain expectations on short and medium terms for construction companies

The volume of the construction works in Romania increased in the first nine months of this year both as gross series and as series adjusted to the number of working days and seasonality, by 3.2% and 4.6%, according to the data published by the National Statistics Institute - Institutul Naţional de Statistică (INS). The new-construction works volume increased by 12.5%, while important reductions were recorded by the capital repairs sector (-13,4%) and also by the maintenance and current repairs segments (-11.7%). Compared to September 2011, the construction production in September 2012 rose by 6.3% as gross series, but decreased by 4% adjusted to the number of working days and seasonality. At the same time, foreign direct investment impairment - that was not offset by the European fundraising - as well as the damage of other macroeconomic indicators are enough reasons for the negative forecasts made for the next year. A third drawback is that all the recovery efforts are threatened by recession and downward adjustment of the structural funds. The first flash estimates on the Romanian GDP in the third quarter of 2012 shows a decrease of 0.5% (in real terms) compared to the previous three months and of 0.8% compared to the same quarter of 2011. Furthermore, the fact that the eurozone has returned to recession (as the region's debt crisis continues to decrease demand for all industries) will also affect the economy of Romania in 2013. In this context, it is not surprising that, currently, the main countries that contribute to the EU budget have decided to apply new austerity measures, especially in what concerns the structural funds. On medium term, local construction companies - affected already by the current rate of absorption (the lowest in the whole EU) - will face a shortage of available funds in the financing of the European programs. Thus, if restrictions would be applied, the existence of many specialized companies will be threatened, resulting into a new "wave" of insolvencies and bankruptcies. According to the latest data available, at the end of September 2012 there were about 1,500 construction companies in various stages of insolvency. For further information and a detailed analysis of the current Agenda Constructiilor issue, click here!