Intl Fin Crisis Affects Sectors In Romania, Particularly Real Estate – Businessmen

"In the heat of global crisis, we must launch a public debate on sectors affected and find ways to save them. Real estate developers, construction companies and all sectors where debts are high," Florin Pogonaru, head of the Association of Businessmen in Romania (AOAR), said during a press conference Monday.

He said the government should seek solutions to support these sectors instead of just thinking of measures backing the stock market.

"Instead of solution for these sectors, we see silly reactions, to back the stock market, when the capital market is a marginal solution in Romania," Pogonaru said.

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In his opinion, real estate developers are faced with several problems, including higher costs for raw materials, higher workforce costs and, most recently, more expensive loans.

"There are developers who self-fund only 20% of their projects, the register delays in selling homes and go from bank to bank for money,” Pogonaru said, adding that other sectors affected by the worldwide liquidity crisis are textiles and, generally, sectors working on low profit margins.

In turn, Monica Tatoiu, member of the association and general manager of cosmetics company Oriflame Romania, said that apart from developers and builders, all companies in supporting industries have problems.

"Construction material makers, interior decorators and all companies related to the construction sector have registered lower turnovers," Tatoiu said.

A cut in activity in the construction sector could hinder economic growth, as the sector is one of the key factors behind the country’s robust gross domestic product growth.

"We can’t just stick to optimistic statements on economic growth, which will probably reach 9% this year. This growth hides a series of traps that will create serious problems unless noticed in time. If we look at the sectors fueling economic growth, we see that the main boosters are, in order, services, industry, construction and agriculture. The last two are not constant: the construction sector is threatened by decline and even crisis, while agriculture depends on many factors," said association vice-president Constantin Bostina.

In his opinion, the evolution of constructions and agriculture will take direct hits at economic growth.

"Romanian economy seems to be working. But it works like a car with four wheels, of which one goes faster – GDP growth, another is trying to catch up – investments, and the other two don’t work, but bring down the economy – foreign debt and the current account deficit,” Bostina said.

He added Romania needs annual economic growth four percentage points higher than the European Union average to be competitive on the single market.