2013-08-28 08:39:13 - New Construction research report from Business Monitor International is now available from Fast Market Research
Romania's economy as a whole is estimated to have grown by 0.5% in real terms during 2012, and we forecast that growth in 2013 will be 1.7%, according to our Country Risk team's latest macroeconomic outlook. However, it is thought that the construction sector outperformed the economic growth rate. Underpinning our relative optimism for the sector is the strong performance of the roads and power sectors, along with an improving non-residential construction outlook. For 2013, we expect real growth of 1.9% for the construction industry, which is a return to growth after an estimated 0.9% contraction in 2012, which could in fact be revised upwards revealing an even smaller decline. Over the period 2014-2017, we expect that Romania's construction market
will expand at annual rate of 3.2%, while the period 2018-2022 will see continued annual growth of around 3.1% in real terms, making for a reasonably auspicious longterm outlook in comparison to the previous years. Risks to our construction sector forecasts are to the downside, with Romania's exposure to the downturn in the eurozone market and structural barriers despite EU membership weighing heavy on growth. The risk to the generous renewables tariffs which have driven growth in the energy and utilities industry are also a major downside risk. Until the eurozone crisis fully abates, it is unlikely that the residential construction market will improve in light of concerns over job security and wages.
Full Report Details at
- www.fastmr.com/prod/670666_romania_infrastructure_report_q4_2013 ..
Key developments over the last quarter:
* Strong Wind Sector: Romania's renewables sector has been performing well over the last few years in light of a better regulatory environment than its regional competitors. As a result, Romania's total nonhydro renewables capacity went from zero in 2007 to nearly 2,000MW in 2012 (BMI estimate). Romania hopes to supply 38% of its electricity consumption from renewable energy sources by 2020. Considering this outlook along with poor performances in the water and oil and gas infrastructure sub-sectors, we forecast that the energy and utilities infrastructure industry will grow in real terms by 2.7% in 2013 yearon- year (y-o-y). The pipeline for renewables projects remains strong, with a large international presence in the wind market to offset the challenging conditions firms' domestic renewables markets. We do however highlight that Romania look set to cut its renewables tariffs which have been a key driver of the industry. If this happens, we will look to downgrade our forecasts for the industry. That said, Romania will still remain a ket market in the region for growth in renewables. Progress on Roads and Waterways:Roads and increasingly waterways have benefitted from European development money with the aim of better integrating Romania with the rest of Europe. Betchel, who had run afoul of Romania's weak public administration, finally settled its dispute over the Transylvanian highway which had been a prime example of the risks of contracts in Romania. That said, the opportunities have also been highlighted, for example with the Comarnic-Brazov highway, which both the EBRD and EIB have said they will finance the project and with China Communications Construction Company, Spedition UMB and Tehnostrade, Vinci, Strabag and Akor and Impregilo SpA and Salini SpA all shortlisted in May for the contract, we are confident of its implementation. Two sections of the Danube River are to receive attention to improve navigability and increase its ability to handle the transport of goods. In a joint project between Romania and Bulgaria, projects worth an estimated EUR231.8mn are underway or in the pipeline. The vast majority of this cost is proposed to be met by the EU as an important step to integrate Romania and its neighbours. The largest waterways project currently under consideration in Romania is the Bucharest-Danube Canal, with an estimated cost of EUR2.58bn. The project has been stalled for a number of years now and funds are yet to be secured as project is still in the preparation phase. The canal would involve a 104km waterway being created, along with hydropower generation capabilities and flood protection for the surrounding areas. Considering these positive developments within the whole transport infrastructure sector, our real growth rate forecast for 2013 is 2.5% y-o-y, which will then average 3.5% annually between 2014 and 2022.
* Residential and Non-residential construction continues to struggle: Unlike the infrastructure sectors, the residential and non-residential sectors are very susceptible to private finance, which is highlighted by their poor performance over the last year in light of Romania's exposure to the financial woes of Europe. Individuals and companies have not been investing their money in new property as job security and struggling export markets have weighed heavy. In light of this we are forecasting a real growth rate of just 1.4% in 2013. We note however an increase in construction permits being granted, and a number of industrial and commercial project announcements lead us to forecast a slight uptick in growth over our forecast period. Over the 2014-2022 period, Romania will average 3.2% y-o-y growth per annum.
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