Q1 Construction Activity in Romania Surges 12.2% Year-on-Year, Chiefly Due to Base Effects
Romania's construction sector experienced a significant expansion in the first quarter of the year, with a volume index surge of 12.2% year-on-year (y/y), according to the statistics office INS. This growth can primarily be attributed to low base effects and the typical seasonal lull in the first quarter.
The construction sector was one of the primary contributors to the overall economic growth in Q1, which was estimated by the INS at +0.2% y/y. For the entire year, the government anticipates that infrastructure projects will fuel growth within the construction sector. However, this growth largely hinges on the absorption of EU funds under the Resilience Facility and the Cohesion budget. The government's budget for public investments may face pressure in the context of fiscal restraint.
Engineering works, representing around 45% of the market, posted the most significant growth at 18.9% y/y. This growth was also the most substantial over the past five years, growing by an average of 8.7% per year. Residential construction, accounting for 27% of the market, increased by 11.1% y/y, while non-residential buildings, representing 28% of the total output, grew by a mere 2.0% y/y. The growth in residential construction has been relatively modest over the past five years, with an average annual increase of just over 1%.
By category of works, new constructions, which account for 69% of the market, witnessed a 9.9% y/y advance. The category of capital repairs, accounting for 9% of the market, experienced a surge of 60% y/y, while current repair works, comprising 23% of the total market, generated 4.1% y/y less activity.
According to enrichment data, Romania's construction sector is expected to experience moderate growth in 2025, with an anticipated growth rate of 2.4%. This growth is anticipated to be bolstered by increased investment in transport and energy projects, leveraging EU funds. In 2024, the government allocated over €11 billion to EU-supported capital projects, which included infrastructure development like road and airbase expansions.
However, the sector also faces challenges such as high construction costs, falling Foreign Direct Investment (FDI), and elevated inflation, which could negatively impact demand and project financing, particularly for residential and transport infrastructure construction.
Despite these challenges, the strategic use of EU funds and public investments is expected to support moderate growth in Romania's construction sector.
The anticipated growth of Romania's construction sector in 2025, as projected by enrichment data, will be bolstered by increased investment in transport and energy projects, which can be considered a significant growth driver within the industry. On the other hand, the sector's growth, particularly in the finance aspect, may be influenced by challenges such as high construction costs, falling Foreign Direct Investment (FDI), and elevated inflation, which could potentially impact project financing.
