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Coface Survey : Romania construction sector keeps being in critical phase

The Romanian construction sector keeps being in a critical phase, shows the Sectoral Risk Panorama, a quarterly publication of Coface company focusing on the risks facing the various sectors from across the world.

The most important factors having hit the construction sector in 2011 were the low population demand, which is currently undergoing an adjustment of the increasingly higher debt service-to-income ratio resulted from the increased interests and dropped payments, the fragile funding support from the bank sector, the foreign and government investments.

After significant shrinkage recorded in 2009-2010, the year 2011 marked a slight recovery of the business for the construction companies, while the preliminary figures for this year point to stabilisation, Coface stressed.

The most recent data released by the National Institute for Statistics reveal that the number of the companies acting in the construction sector dropped 12 percent in 2011 as compared to the prior year, while the total number of the employees went up 6 percent, in line with the turnover rise. Gross investments were up 34 percent, so that their rate as a percentage of the turnover went up to 22 percent in 2011 from 2010, when it stood at 17.65 percent.

In spite of such a development, the business rise is not being felt in increased profits, as the gross result recorded in 2011 is 24 percent lower than in 2010. Moreover, the strengthened analysis of the construction firms shows their efficiency is close to the profitability mark, with the gross profit rate being around 1 percent.

Coface survey says Romania is one of the few new European Union members recording a trade surplus in steel products. This is due to the fact Romania is recording a structural surplus of the production capacity inherited from the time when its economy was centralised, which makes the local industry strongly dependent on foreign demand. An average 70 percent of the Romanian steel output (both raw material and finished products) is shipped to the foreign markets.

 

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