According to Dr. Sebastian Sipos-Gug, EECFA’s researcher to Romania, the local construction industry is not directly impacted by the conflict in Ukraine. However, the market is already feeling the effects of higher costs, increasing inflation and growing interest rates. 

The Romanian economy is not strongly connected to that of Russia, Ukraine or Belarus, with imports from all three countries totaling at less than 5% of all imports into Romania in 2019 and exports to them totaling less than 2.5% of all exports in 2019, according to the National Institute of Statistics (NIS).  

However, there are some segments where trade intensity is much higher: energy and ores. In 2019, 37% of all mineral fuels and oils and 40% of ores came from one of the three countries. Thus, trade difficulties would negatively impactthe availability of fuel and materials and, thus, the price of construction, wrote the researcher. 

“While construction costs impact supply, the other two issues (interest rates and inflation) work together to negatively impact demand. The National Bank of Romania increased the reference rates to 3%: the 5th raise since September 2021. This will have a knock-on effect on the costs of consumer and new mortgage loans, making them more expensive, at a time when the residential real estate market is highest since 2008 with asking prices for apartments up 20% in March 2022, compared to the same month of 2021. Coupled with record levels of inflation, especially related to fuel, heating and food, this would make financing new home purchases exceedingly difficult, and will push demand down,” wrote Sipos-Gug. 

While the non-residential construction market will have to deal with supply chain disruptions and rising energy costs, demand for infrastructure will also be hampered by increased construction costs.