Abstract
Industry Forecasts
Croatia’s construction sector is exposed to the
headwinds generated in the second half of 2008 by the
global financial
crisis and recession in developed markets. This much was acknowledged by
Prime
Minister Ivo Sanader in November 2008, when he said in parliament
that some infrastructure projects
might have to be delayed because of
reduced budgetary resources. Indeed, with GDP growth in Croatia
during
2009 likely to be close to half that seen in 2007, tax collection will suffer.
Further pressure on the
construction industry will be generated by a
reluctance on the part of banks to lend to developers.
Although the
authorities have scrapped very tight marginal reserve requirements on foreign
borrowings
by banks, the reluctance of banks to lend means that overall
liquidity in the private sector will remain
under pressure. In this
context, we forecast that real growth in the construction sector in Croatia
will slow
to 1.4% in 2009, from 3.6% in 2008 and 10.0% in 2007.
However, there should be a recovery from 2010, with real construction sector
growth forecast at above
5.5% that year and over 7% in 2011. The long-term
outlook is supported by the prospect of eventual EU
membership. We
currently forecast this to occur within the forecast period, most likely in
2012. Not only
will this likely lead to an increase in investments as
firms position themselves to take advantage of the
country’s full
entrance to the European single market, but Croatia will be able to access
many hundreds of
millions of euros in pre-accession aid. This will help to
keep fixed investment growth – which accounts
for around 31% of GDP
– ticking over in the coming years. At present, we are forecasting real
fixed
investment rising by an average of 4.6% between 2008 and 2012.
Key Projects Subject To Delay?
Construction work on the Peljesac bridge
could be subject to delays in 2009, due to the effects of the
global
financial crisis on Croatia’s budget. The pressure on the budget also
has possible implications for
the work at Zagreb Airport, which, according
to a report by HINA, may have to be financed through
concessions, rather
than direct budgetary outlays.
Company Analysis
We evaluate the
prospects of Konstruktor Inzenjering, looking at their strengths, weaknesses
and
opportunities, as well as the threat posed by the global economic
downturn.
| 
View Cart
