ANALYSIS: Negative forecasts for the Romanian construction sector, in 2014

Despite that the Romanian economy entered in a positive trend in the first five months of 2014 (continuing the evolution of GDP in 2013), the construction sector shrank visibly, the data of National Institute of Statistics (INS) available for the first semester indicating a contraction in the volume of construction works, both as gross and adjusted series (according to the number of working days and seasonality), by 10.2%, respectively by 9.4% compared to the same period in 2013. Unlike previous quarters, the economic growth in January-May 2014 was not only due to the industry (as in 2013), but also to retail, which increased by 7.8% compared to the same period in 2013. Therefore, in the first five months of 2014, both exports and imports increased by 8% each, compared to the same period in 2013. According to the latest reports of Raiffeisen Research, Romania's GDP will strengthen to 3.5% in 2014 and 2015, supported by all sectors of the economy. The annual inflation rate reached in June 2013 - June 2014 a low record of 0.66%. The National Bank of Romania (BNR) kept the monetary policy rate to 3.5%, but this may decrease until the end of the year, as a decision that would aim to encourage lending and stimulate growth. Exchange rate was relatively stable in the second quarter of 2014, oscillating between 4.38 and 4.47 lei for one euro. Government debt stood below 39% of GDP, and was the fifth lowest in the European Union, and the new budget deficit target for 2014 was set to 2.4% of GDP. Taking into consideration the failed start of the year and the disastrous results in the first semester of the construction industry, the managers of the Romanian construction companies estimate further contraction in the sector, and in 2014, the two election periods had no positive impact on the investment sector, as the greatest part of the Government budget was intended social spending. Thus, the construction market has stagnated for the last years to 9 to 9.3 billion euro, there is no reason to be expected any exceedance in 2014. Moreover, the resuming of growth is conditioned by the Government assumption of investment programs, sustained both by EU funding and properly co-financed.