Bucharest’s contribution to national GDP fell by 2.4 percentage points from 2019 to 2021, with an estimated tax revenue loss of 17.2 billion lei (€3.45 billion) by 2026, the main findings of the first impact study on the lockdown of the authorization process in Bucharest, conducted by financial analyst Janku Huda and presented for the first time on Tuesday, September 27, at a conference organized by the BUCHAREST REAL ESTATE CLUB.

The administrative deadlock and uncertainty of the urban climate are also reflected in the direct contribution of construction industries and real estate operations to the formation of Bucharest’s GDP. So, if in 2019 it was 14.2%, then in 2020 – 14%, and in 2021 – 13.3%.

Nationally, the construction and real estate industries have been very dynamic in recent years, contributing most to the economic recovery from the impact of the Covid-19 pandemic. These sectors recorded the highest job growth in 2021 compared to 2019 (+80,703 new jobs), the highest income growth (+90 billion lei), the highest growth in the balance of fixed assets (+44 billion lei), reflecting the largest investments in compared to any other sector of activity. Statistics show that while there has been an upward trend at the national level, a significant decrease has been recorded in Bucharest.

Considering the polarization of this sector (95% of companies have an income of less than 1 million euros, which is 29% of the total income), the decrease in the number of building permits determines that 9 out of 10 companies active in the analyzed sectors operating in Bucharest are at risk of insolvency . The main vulnerability of these companies is their small size, in conditions of a very high level of debt (almost 80%).

The expected loss of tax revenue is 17.2 billion lei (3.45 billion euros), while the total loss of added value in the economy is approximately 52 billion lei (10.4 billion euros) for 2022-2026. “The opportunity costs are huge, given that the potential tax revenue that could be lost could be used to build 5 hospitals, 5 secondary schools and 10 primary schools with kindergartens in each sector of Bucharest. As an alternative, these funds can be used to restore the entire used heating network of Bucharest.”– said financial analyst Janku Huda during the BREC conference.

“The consequences of the lack of predictability and administrative blockage could lead to financial losses exceeding the 10.4 billion euros estimated in the study, due to the reluctance of international and local investors to invest their capital in new investments in the Bucharest market. The cost of these losses cannot be quantified.”– said Despina Ponomarenko, President of the Bucharest Real Estate Club.