Romania Infrastructure Report Q2 2008

The Romanian construction industry contributed an estimated 5.95% to gross domestic product (GDP) in 2006 and was valued at US$7.43bn. Although the Romanian construction industry is small by European standards, the rapid growth has attracted several foreign and local companies to invest in the construction sector. This report forecasts the Romanian construction industry to grow, on average, 8.4% annually during the 2008-2012 period. The European Bank for Reconstruction and Development (EBRD) and the Luxembourg-based European Investment Bank (EIB) are increasingly financing government and private projects in the construction industry. The International Monetary Fund (IMF) has forecast that the country will benefit from enhanced foreign investment flow.

The Romanian construction industry has undergone immense upheaval since the demise of the Communist bloc and the overthrow of President Nicolae Ceausescu in 1989. Following the break-up of state-run construction corporations in 1990, there were just 100 registered construction companies operating in the country. Today, there are more than 30,000 contractors in Romania, and about 1,000 of these are registered with the Romanian Builders and Contractors Association.

The government is trying hard to achieve European standards for its industries. For instance, the Romanian Ministry of Environment and Water Management is seeking to align Romanian environmental standards with European standards. A number of major infrastructure projects have been planned or are under way in Romania. They include the Bucharest-Brasov motorway valued at US$3.05bn, Turkish company Opus Project&Development's construction of a residential complex in Stefanestii de Jos village, valued at US$968.06mn and River Invest's residential and commercial complexes in Bucharest worth US$943mn. Foreign companies such as Spain-based Imobiliare and Fadesa, Hungarian TriGranit, French Bouygues, Italian Italstrade and Austrian Strabag all have a strong presence in the Romanian construction industry. New companies such as General Electric (GE) and AFI Europe are entering Romania to take advantage of the growth potential of the economy.

A number of risks could hamper the growth of the construction industry. For instance, a labour shortage due to relatively higher wages offered outside the country is a major concern for the continuation of growth in the industry. A rising budget deficit might have an increasingly adverse impact on the availability of funds for the infrastructure sector and on the economy in general.

Despite these risks, BMI forecasts that the construction industry will grow by 11.33% year-on-year (y-oy) in 2008. The construction industry is forecast to reach a value of US$18.95bn by 2012, from an estimated US$12.91bn in 2008.