The volume of construction works in Romania contracted by 4.1% y/y in April after the average 2.2% y/y decline in Q1, the statistics office said. 

Tighter lending regulations mulled by the central bank might hurt the residential segment that has recently been the sector's main driver, while the use of European Union funds for infrastructure projects could in contrast provide a major boost to the sector.

The residential segment, which prevented the sector’s collapse in 2017 given its 70% y/y expansion, is already losing momentum, despite activity remaining at very high levels in first tier cities such as Bucharest and Cluj. At country level, the volume of activity in the residential segment contracted by 24% y/y in April, after the 25% y/y slump in Q1.

The segment of non-residential buildings (offices, retail) increased by 4.6% y/y after the 7.7% y/y advance in Q1. But this comes amid negative sentiment for the segment, as retail surfaces particularly are seen as oversized in second tier cities. Last year, the volume of works for non-residential buildings contracted by 12.7% y/y after feeble 1%-2% annual growth rates in the previous couple of years. Again, the developments are very different from one region to another.

The civil engineering works segment recovered to a certain extent after the subdued activity in previous years. The volume of works, mainly contracted by the public administration, increased by 3.7% y/y in April and 8.2% y/y in Q1 after the 22% y/y plunge last year. In absolute terms, works at the country's main infrastructure projects are lagging behind schedule.