Abstract
The Czech Republic is feeling the squeeze of the global economic slowdown, but
the latest quarter did
nevertheless bring progress on some fronts,
particularly in the energy sector. BMI’s latest forecast is that
construction spending will amount to CZK205bn in 2009 , down from the CZK211bn
we were
forecasting only one quarter ago. The figure represents a slowdown
from the CZK209bn that the national
statistics office says was spent on
construction in 2008. Construction’s decline is, of course, in line
with
the country’s general economic slowdown.
Forecasting beyond
2009, BMI sees construction industry value rising to CZK213bn in 2010, a 1.9%
rise
in real terms, and to CZK228bn in 2011, a real increase of 4.3%. We
expect growth rates to accelerate to
above 5% in the years after that.
Such optimism is based upon the current global economic crisis coming
to
an end and recovery taking hold.
The Czech Republic has a number of
factors that can cushion the blow of the current slowdown. As a key
country at the crossroads of emerging economies and powerful EU economies such
as 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 some signs of
infrastructure investment in the energy sector and residential and
commercial construction. The CEZ Group’s plans to expand the size of the
Temelin nuclear plant got
some political support even if environmental
assessments remain outstanding and construction is not
scheduled to begin
for another four years. Several renewable projects were also announced in the
latest
period.
The government is proceeding with the sale of the
national airline, but the latest quarter brought mixed
signals about the
privatisation of Ruzyne airport in Prague. Parliamentarians have made noises
in
opposition to a sale when asset prices are low, but the government is
so far sticking to its plans to proceed
with the sale. Since the
government is currently an interim one – until elections expected in
October – the
outcome of this disagreement is impossible to
predict.
In the residential and commercial construction sector, at least
two new projects were announced and
Plaza Centers said it is resuming work
that it was forced to halt at the end of last year. Given that the
projects are led by different companies, the announcements suggest that
investors are finding the funds
needed to move ahead. Because the current
economic slowdown began as a credit slowdown, any sign
that credit is
again becoming available should boost optimism about the future.
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