BR Analysis. Romania's construction market in crisis risk? From missing 30,000 workers to a value 25 pct less than ten years ago

The construction works in Romania registered a decline of 0.8 percent in June 2018 as compared to May 2018, the third monthly decline in the European Union, according to data published by Eurostat. The question is why are the construction market continuously losing ground in Romania, while in the EU, the sector gained 0.6 percent.

According to the data provided by INS, in the first six months of 2018, compared to the same period in 2017, the volume of construction works declined by 0.1 percent as gross series.

In addition, construction works in Romania had the second largest decline in the European Union in the second quarter of this year, 2.5 percent compared to the previous quarter.

What could be the reasons for the stumbling evolution of the market, especially in the case of residential constructions, domain which lost 32.4 percent year-on-year in June, while engineering constructions – including government-financed roads and bridges works – increased by 15.8 percent. Non-residential buildings works rose by 9.8 percent year-on-year.

The value of the market in 2017 was around EUR 8.9 billion, compared with more than EUR 12 billion in 2008.

”The problem with the construction market is that the state haven’t started its investments yet. There are auctions, but between the singing of the contracts and the start of the actual works passes months, sometimes years. We have a problem with the unclear laws, the market is unsecure, and the companies are confused,” Mircea Oros, technical director for Romanian Association of Construction Entrepreneurs (ARACO), told BR.

According to ARACO, in 2017, the Romanian state invested RON 26.7 billion in construction activity, with RON 2.8 billion below 2016 and with RON 25 billion less then 2015.

The issue of the workforce

Another reason for the decline of the construction market, is the missing workforce. According to ARACO officials, in 2008, during the peak of the property market, there where more than 414,000 employees in constructions. Now there are 384,000, so at a first sight the market is missing at least 30,000 people.

The Federation of Employers’ Societies of Construction (FPSC) estimates that the need for workers will increase to 600,000 if the public works announced by the Romanian Government are to start even partially in the coming years, so the lack of workers will grow.

Alexandru Erbasu, the president of FPSC, said the crisis is now low, as there is demand for another 50,000 to 60,000 people, but in two years there will be a crisis of hundreds of thousands of people.

„More important is that we already can speak about missing specialists, educated workforce, not only skilled workers or unskilled workers. We hope that the government will agree to increased the quota of non-EU workers on the market to dilute the crisis,” Oros stated.

The dilemma of the residential sector

The residential construction works registered the largest decrease these year, reaching 30 percent at the year-half. And that in the condition that the demand haven’t lost pace, even if credits become more expensive because the growth of ROBOR above 3.3 percent from less than 1 percent one and a half years ago.

”The residential market had its peak in 2017, it was almost expected to lose pace this year, even if the decrease is a bit too steep,” said Oros.

The analysts think the residential market might bounce back if the workforce crisis is at least partially resolved, and the demand remains balanced.

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