SIMILAR ARTICLES

Document / PNL Government Program for next year

On Thursday, the appointed Prime Minister, Ludovic Orban, presented to colleagues from the National Office the document that he will submit to the Parliament, which… Mai mult

Ranking of discernment: Spectacular increase in August in the difference between Romania’s other EU countries’ borrowing costs

The long-term interest rate fell below zero in the Eurozone and dropped to only 0.28% on average at the EU level, half as compared to… Mai mult

Tourism balance drops to minus 36%, despite billions of public money that Government pumped into the market

Net costs for the state with holiday vouchers for public sector employees and the VAT cut for tourism will amount to RON 1,878 million in… Mai mult

Continuing quantitative easing: how justified is it? (III)

In this last article from the series devoted to the analysis of the quantitative easing performed by the European Central Bank (ECB), we will deal… Mai mult

Continuing quantitative easing: how justified is it? (II)

In this second article of the series dedicated to the analysis of the quantitative easing performed by the European Central Bank (ECB), we will focus… Mai mult

Cronicile

Parallel state of underdevelopment: Three years of decline in construction sector, in parallel with economic growth. Differences from our eastern sister countries

de Marin Pana , 25.2.2019

Officially published statistical data reveals a massive paradox:

Romania is the country that can register a robust year-on-year growth based on a construction sector which is on a downward trend.

We chose 2014 as a reference basis for 2018, as it marked the emergence from the economic crisis and the resumption of the GDP growth trend.

As we can see, in contrast to the overall economic growth, the construction sector had a relatively weak evolution until it got to have a negative impact on the economic outcome over the past two years.

That appears to be bizarre for a country undergoing a process of development and recovering the gap to the West.

*

Evolution of the construction sector between 2015-2018

Year

GDP growth

Construction sector impact

Construction sector

  1. New constructions
  2. Overhauls
  3. Maintenance, on-going refurbishment

    A- Residential buildings
    B- Non-residential buildings
    C- Engineering construction

*

In order to have a clearer picture of the relative importance and the effects on the overall sectorial outcome, it would be important to see how the weights used for the calculation in the structure and by construction objectives.

Simplified, the situation would be like this:

new buildings count for about 60% and refurbishments to existing buildings for 40% or 40% buildings (of which less than one third for habitation!) and 60% engineering constructions (see table).

*

Weighting coefficients used for the construction sector

  1. New constructions Residential buildings
  2. Overhauls                              Non-residential buildings
  3. On-going refurbishment Engineering construction

*

2018 – below, yes! – than 2014

So we witnessed declines in 2018 compared to 2014 almost across the board, with significant values in non-residential buildings (to be seen rather as greenfield investments), overhauls (namely bringing back industrial halls to parameters, etc.), and construction engineering (here it should be read that activity, already anaemic in terms of infrastructure, with an emphasis on motorways, declined).

Decreases largely driven by the inability to use the European funds made available (of course, by complying with rules that made them less attractive to local private interests) and budgetary allocations increasingly managed by the populist system which means cutting from investments in order to allocate social benefits and wages (in order to meet, even with a near miss, deficit rules).

The only segment that has grown over the last four years, the residential construction, suddenly speeded down in 2018 after the significant expansion in 2017 (which, however, did not prevent us from having a negative overall impact on GDP). In addition, to be noted, it represents less than one eighth in the sectorial structure in terms of weight in the final outcome.

In this context, the question is whether we could go on with this economic development style with the handbrake on in constructions.

A terse comparison with “others”

For the time being, we have managed somehow, but if we look at the rest of the EU countries, it seems that we are doing what it should. For this, it is enough to remember that European statistics place us only on the 16th position out of 28 in the EU by construction sector share, with only 0.7% of the European total.

That is, well below the GDP share of about 1.25%, and especially well below economies with a GDP similar to ours, such as the Czech Republic (1.2% construction share in EU) and Portugal (1.0% share). So countries that already have a much more efficient road system than ours.

Also for reference, our Hungarian neighbours have a 0.7% construction share in the EU with 0.8% of EU’s total GDP, whereas in Bulgaria’s case weights are the same, namely 0.3%. Even though Poland also has a percentage gap similar to ours (3% of the EU GDP, with 2.4% in construction), the ratio of their indicators, placed at 80%, does not resemble the one below 60% in our case.

Sooner or later, the costs of insufficient infrastructure development will contribute to capping the economic growth and affect the standard of living, including public services (roads, schools, hospitals), despite the apparently favourable economic growth figures, currently on paper.

Mergeți în homepage ›

Publicat la data de 25.2.2019

Lăsați un comentariu


NEWS

Transport Ministry announces it has sent to Brussels the financing request for Sibiu - Pitesti highway

The Transport Ministry, as the Intermediate Body in Transport, approved the financing request for the project "Construction of Sibiu - Pitesti highway", Sections 1, 4… Mai mult

Romania and Juncker Plan: EUR 720 million attracted, of which 35% by Transgaz for BRUA

(The map of investment financed through Juncker Plan, by GDP share. Darker colours mean higher shares) The operator of national natural gas pipelines, Transgaz (TGN)… Mai mult

Top 3 reasons why young people leave Romania

Lack of trust in authorities, corruption and low living standards are the main reasons why young people leave Romania. The data is part of a… Mai mult

IMM Invest Romania – program implementing rules have been published

The Ministry of Public Finance announces that it has issued the methodological norms for the implementation of the Program for supporting small and medium-sized enterprises… Mai mult

Pollution import and car park expansion: comparisons with the other EU states

Romania is the EU country with the fewest cars in terms of the number of inhabitants, according to data recently published by Eurostat. We appear… Mai mult

Government is trying to save budget deficit: reductions in public administration system, cancellation of bonus for harmful conditions, excise duty on soft drinks

The Government is preparing the public for the first measures aimed at avoiding the budget slippage, which would be applied by the PSD-ALDE government. News… Mai mult

Laura Codruta Kovesi remains alone in the race for European Chief Prosecutor

French Prosecutor Jean-Francois Bohnert will be appointed as head of the European Financial Prosecutor's Office, a position for which he was heard on Thursday, 11… Mai mult

Romania - EU country with highest risk of dying in a road accident, Bulgaria is quickly decreasing number of victims since it built motorways

Romania recorded the highest road deaths in the EU also last year, with 96 deaths per one million inhabitants in 2018, almost double the EU… Mai mult

Latest developments in progress at Health Ministry: Differentiated wages based on performance, competitions organised at a regional level not by hospitals

Sorina Pintea announced on Thursday further new changes that will be brought to the functioning of the health care system, including new rules for employment… Mai mult

ANAF changes selection procedure for liquidators. Main changes

The new order on approval and selection procedures for insolvency practitioners is an important step to a very good direction, industry experts say. ANAF is… Mai mult

Romania loses competition for a seat at UN Security Council. MAE Excuse: Campaign started too late

Romania lost to Estonia in the final vote to get the non-permanent member position within the UN Security Council for the period 2020-2021. On Friday,… Mai mult

Business internationalization / eMAG makes a step to entry five new international markets and targets a business of EUR 2 billion

eMAG hopes to get the opinion of the Hungarian Competition Council over the next two months for the acquisition of Extreme Digital, the market leader… Mai mult

"At a distance from books": 85,000 teachers (one third of educational staff) are graduates of distance learning

Approximately 85,000 teachers are graduates of distance learning (ID) programs, Education Minister Ecaterina Andronescu said at a meeting with school inspectors from Caras-Severin County. The… Mai mult