FORECAST REPORT ROMANIAUNTIL 2016

ROMANIA 2014 EECFA 02

This Forecast Report was written by

EBUILD srl, Romanian member institute of EECFA

Mr Sebastian Sipos-GugT: + 40 359 466 330ebuild@eecfa.comwww.ebuild.ro

Editor: EECFAAnalytical approach and methodological background:Dr Aron Horvath EECFA Research ELTINGAJanos Gaspar EECFA Research

www.eltinga.huwww.eecfa.com

Copyright shall be held by EECFA, Winter 2014

ROMANIA 2014 EECFA 03

CONTENT

04 _ Summary

05 _ Summary: Forecast revision

06 _ Forcast table 1 | macro figures

07 _ Forcast table 2 | construction summary figures

08 _ Residential construction | graph

09 _ Residential model | graph

10 _ Residential construction | graph, text

13 _ Forcast table 3 | residential figures

14 _ Office construction | graph

15 _ Office construction | graph, text

18 _ Retail and wholesale construction | graph

19 _ Retail and wholesale construction | graph, text

22 _ Industrial and warehousing | graph

23 _ Industrial and warehousing | graph, text

25 _ Hotel construction | graph

26 _ Hotel construction | graph, text

28 _ Education- and Health-related construction | graph

29 _ Education- and Health-related construction | graph, text

31 _ Other non-residential | graph, text

32 _ Forecast table 4 | non-residential figures

33 _ Road construction | graph, text

36 _ Railway construction | graph, text

38 _ Other transport infrastructure | graph, text

40 _ Energy, pipeline, cable construction | graph, text

42 _ Public utility | graph, text

44 _ Forecast table 5 | civil engineering figures

45 _ Project data | table

ROMANIA SUMMARY 2014 EECFA 04

2000 2016

30% of total constructionRenovation ratio* 14%

(2013)

*Renovation / Total

Residental (at constant price)2000 2016

25% of total constructionRenovation ratio 17%

(2013)

Non-Residental (at constant price)2000 2016

45% of total constructionRenovation ratio 30%

(2013)

Civil engineering (at constant price)

With a GDP evolution of +3.5% in 2013, Romania wit-nessed the second biggest growth rate in the EU., The performance for the year 2014 is also set to be around 2%, with positive forecasts for 2015 and 2016 as well (Source: Eurostat). Private consumption and real wages are also foreseen to undergo growth in 2015 and beyond, with a positive impact on the investment and construction activities throughout the economy, while the stable inflation rate should ensure growth to take place. The demographic evolution is having an overall negative impact on the construction sector, with an aging population, although this effect is still modest. Due to the positive economic perspective, Romania will have a growing market for investments into construction.

SUMMARYResidential construction has been the major driver for construction sector growth in 2014. Increased income, lower loan rates and continued government support had a positive impact on the Romanian residential mar-ket. This effect was further amplified by the resurgence of large scale speculative residential projects in 2014, and their number is to rise 2015 and 2016. However, residential transaction prices remain low and most transactions are for smaller homes, which can easily be mortgaged with government support and thus major growth, comparable to 2008, is not expected.

For 2015 and 2016, we expect non-residential construc-tion to continue to expand on all sections, with office and industrial construction being the largest contrib-utors to this growth. Retail developments are still limited, but might increase in the future as economic growth will translate to purchasing power., Further-more, infrastructure will improve since Romania has a lower than average density of commercial space. Office and industry benefit from lower wages and high accessibility to qualified personnel in the Romanian uni-versity centers and continue to be the biggest sections

of non-residential construction; nevertheless, ware-housing is still underperforming mainly due to the lack of modern transportation infrastructure. However, it might see a surge in the future if the situation improves.

Civil engineering has experienced shrinkage in 2014; though we expect the situation to improve in 2015 and beyond. Road construction continues to remain the most influential section, covering one third of all civil engineering output. Although road construction was expected to grow in 2014 and further drive the con-struction market upwards, several factors prevented this from happening, including the cancellation and delay of several key projects, lawsuits, budget cuts for investments and a negative effect of the election pro-cess. The sector is prone to major growth in the future, should these problems be at least partly addressed, as all the major infrastructure sections (road, railroad, waterways, airports, public utilities) are underdevel-oped or in need of repair. Many projects are ongoing or are about to be launched and funding could be achieved with the help of European Union co-funding.

Macro outlook until 2016 Population (20-29 age group) GDP Private consumption Industrial production Employment Income Finanacial conditionsGREEN: POSITIVE GREY: NEUTRAL RED: NEGATIVE

Summar y

ROMANIA SUMMARY: FORECA ST RE vISION 2014 EECFA 05

In case of residential construction, our forecast has slightly been adjusted in light of new data. The largest change was related to multi-unit construction where our forecast has been adjusted upwards due to the evolution of building permits and ongoing/planned projects.

Non-residential construction also saw some adjustments. In case of office construction, in light of market developments, namely higher than expected completion rates, we have updated our short-term forecast for 2014 upwards, however, the 2015 and 2016 forecast continues to be that of a small positive growth. For the retail sector, market contraction in 2013 and 2014 was more evenly distributed among the two years. By 2015 both forecasts converge on the same expected output and we continue to foresee a small negative evolution of this construction type.

Our industrial, storage, hotel, education and health construction forecasts remain unchanged.

Civil engineering saw the largest revisions. In light of the low performance in the first quarters of 2014 we have altered our forecast for 2014 from positive to negative, with continuing growth to be expected in 2015 and 2016. The sectors most affected by this change are road and railroad constructions. Due to various political and legal issues, as well as the impact of the election year, these sectors have underperformed (more information on the assumed causes can be found in each corresponding chapter). Energy-related construction has also been adjusted downwards; as several projects have been postponed or cancelled. Nonetheless, in the long term we expect growth to continue in this sector.

SUMMARY: FORECAST REVISION

2000 2016Residental (at constant price)

2000 2016Non-Residental (at constant price)

Current forecast Previous forecast

2000 2016

Civil engineering (at constant price)

Summar y: Forecast rev ision

ROMANIA FORECA ST TABLE 1 2014 EECFA 06

FORECAST TABLE 1

ROMANIA

MACRO CONDITIONS AND DEVELOPMENTS 2006 2007 2008 2009 2010 2011 2012 2013 2014(F) 2015(F) 2016(F)

POPULATION (000) 21 257 21 131 20 635 20 440 20 295 20 199 20 096 20 020 19 959 19 909 19 869

POPULATION AGE GROUP 20-29 YEAR (000) 3 104 3 061 2 877 2 813 2 774 2 720 2 653 2 618 2 594 2 557 2 508

GDP GROWTH (%) 7.9 6.3 7.3 -6.6 -1.1 2.2 0.7 3.5 2.0 2.4 2.8

PRIVATE CONSUMPTION GROWTH (%) 12.9 12.0 9.0 -10.4 -0.2 1.1 1.1 0.9 3.8 2.3 2.4

RETAIL TURNOVER (%) 23.1 20.6 18.2 -9.3 -7.3 -1.2 4.2 1.0 6.0 3.0 3.0

INDUSTRIAL PRODUCTION (%) 9.9 10.1 2.7 -5.3 5.1 7.7 2.8 7.1 5.5 3.0 3.5

EMPLOYMENT (000) 9 313 9 353 9 369 9 243 9 239 9 138 9 263 9 247 9 290 9 355 9 428

REAL WAGE GROWTH (%) 9.0 14.7 16.5 -1.5 -3.7 -1.9 1.0 0.8 2.8 1.3 0.7

CONSUMER PRICE INDEX (%) 6.6 4.8 7.9 5.6 6.6 5.8 3.3 4.0 2.2 3.1 3.0

INTEREST RATE ON NEW HOUSING LOANS (% P.A.) 10.0 9.7 11.0 12.6 11.7 9.5 8.0 7.5 5.9 6.3 6.0

1 EUR IN RON 3.5 3.3 3.7 4.2 4.2 4.2 4.5 4.4 4.5 4.4 4.4

Forcast t able 1 | macro f igu res

ROMANIA FORECA ST TABLE 2 2014 EECFA 07

FORECAST TABLE 2

ROMANIA VALUE (RON MLN)VALUE

(EUR MLN) GROWTH RATES AT CONSTANT PRICE (%)

CONSTRUCTION MARKET SIZE AND DEVELOPMENT

2013 2013 2006 2007 2008 2009 2010 2011 2012 2013 2014(F) 2015(F) 2016(F)

RESIDENTIAL

NEW 18 993 4 297 - - - -26.2 -14.3 -21.3 11.0 -7.0 6.6 5.0 1.1

RENOVATION 3 092 700 - - - -4.7 -16.2 5.4 -1.2 28.0 2.2 4.1 0.2

TOTAL 22 085 4 997 47.8 50.9 11.2 -24.6 -14.4 -18.9 9.6 -3.3 6.0 4.9 1.0

NON-RESIDENTIAL

NEW 14 953 3 383 - - - -17.9 -13.6 14.0 -22.4 6.9 6.6 2.5 2.1

RENOVATION 3 063 693 - - - -11.9 -31.2 16.9 -11.0 14.6 2.8 4.8 3.6

TOTAL 18 016 4 076 21.3 18.1 33.0 -17.0 -16.6 14.4 -20.7 8.1 6.0 2.9 2.4

BUILDING CONSTRUCTION

NEW 33 946 7 680 - - - -23.1 -14.0 -7.1 -5.5 -1.4 6.6 3.9 1.6

RENOVATION 6 155 1 392 - - - -8.9 -24.8 11.5 -6.6 21.0 2.5 4.5 1.9

TOTAL 40 101 9 073 35.5 37.2 19.0 -21.6 -15.4 -5.0 -5.6 1.5 6.0 4.0 1.6

CIVIL ENGINEERING

NEW 23 236 5 257 - - - -5.5 -2.1 -1.1 -9.6 3.0 -8.9 9.3 6.1

RENOVATION 9 723 2 200 - - - -11.1 -11.5 2.6 4.2 4.6 -2.2 4.3 1.1

TOTAL 32 959 7 457 24.1 26.8 27.0 -7.1 -4.7 -0.2 -6.0 3.5 -6.9 7.7 4.6

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