CONTRACTORS & DEVELOPERS: The builders and the lack of public investments

The decrease by 6.7% of the local construction market in 2014, subsequent to a contraction of 8.7% in 2013, was mainly generated by the drastic reduction in government investment in infrastructure (23% last year), given that Social Democrat government formed in 2012 has made it a priority by social incentives and a populist strategy in public spending, according to an analysis made by Polish research company, PMR. "The decline in infrastructure could not be offset by increases of 7.8% in residential building construction and 4.6% for non-residential ones. In the last two years, the construction industry in Romania continued to decline especially due to substantial reductions in public sector investments. The parliamentary elections that took place in December 2012 were decisively won by a coalition led by the center-left party. During 2013-2014, the Government has pursued a populist policy in public spending, despite an increase of 3.4% of GDP in 2013, followed by an increase of 2.8% in the last year. It is believed that the Bucharest Government deliberately reduced public investment in the past two years to receive additional financial resources to increase benefits for people, the ultimate goal of this initiative being represented by the stake of presidential election in November 2014", said PMR analysis. Last year, the construction industry in Romania has been supported mainly by private developers investments in residential and nonresidential areas, and also by the increase the average income of the population, which has invested in renovations and/ or repairs. At the same time, the sector of civil engineering works, mainly related to investment in energy infrastructure and transport, could not keep up with the pace of private property development, primarily because of reduced public investments. In 2014, the volume of civil engineering works accounted for only 38% of total production in construction, while the residential sector accounted for 36% and the non-residential works reached 26% (most investments aiming commercial and industrial projects).