Abstract
The Czech Republic won’t be as hard hit by the global economic slowdown
and by the credit crisis as
some of its neighbours, but the country
won’t be able to avoid some damage. GDP will contract by 2.1%
in
2009, according to BMI’s forecasts.
Using BMI’s new
methodology, our forecast for the Czech construction industry is that it will
contract
0.6% in 2009 before resuming growth in 2010 and then seeing
accelerating growth in the subsequent
years. The forecast is for the Czech
construction industry to be worth CZK211bn in 2009. Only three
months ago,
BMI forecast a Czech construction industry of CZK244.03bn for the year. Our
forecast
doesn’t see annual growth going above 5.0% a year – a
level common several years ago – through the end
of the forecast
period.
The reassessment of the figures is primarily due to the rapid
economic slowdown that has followed the
credit crisis that first appeared
in 2007. The Czech Republic has a number of factors that will cushion the
blow. As a key country at the crossroads of emerging economies and powerful EU
economies like
Germany and Austria, Czech infrastructure development will
find advocates beyond the country’s
borders. And because the
construction industry represents a relatively large part of the economy
– and the
work force – political pressure for government
stimulus to soften the slowdown will be greater.
The latest quarter
includes a surprising amount of news about infrastructure projects that
underlines the
point. Skanska has won several contracts for road
construction; the railroad administrator is moving
ahead with a large
contract to maintain and service the railroad; and the government says it is
proceeding
with plans to privatise the airline.
But it would be naive
to think the Czech Republic could be spared the pain of the slowing economy.
The
government has already hinted that it won’t be able to complete
the sale of the Prague airport this year as
it had once hoped. And the
government’s plan to accelerate some capital spending by moving it
forward
to 2009 and 2010 will mean that some funds expected to be
dispersed in later years will be used up
sooner. Some public-private
partnership projects are likely to be delayed or cancelled.
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