Construction in Slovakia set to resume growth
Over the past two years, Slovak construction has been lacerated by the economic crisis. The reduction in purchasing power, the low level of business confidence, high unemployment and a scarcity of capital discouraged construction projects in the country in 2009 and 2010.
Another negative factors which affected the Slovak construction industry in 2009-2010 were:
- insufficient demand for construction, particularly in the subgroup of building construction
- limited funding for construction, reduced access to mortgages and loans because of tougher lending conditions from ailing banks
- the postponement of, and, in the end, the collapse of, the public-private partnership investments in the road construction subgroup
- complications in accessing EU funds for construction projects
- the increasing lack of transparency in public tenders in the construction industry.
With the exception of civil engineering, which was more resilient to the crisis because of the continuation of a number of large transport infrastructure projects, the output of all subgroups of the construction industry was adversely affected in 2009 and 2010. Overall, there was a reduction in construction output in Slovakia in both years, with almost €1bn being lost between 2008 and 2011. Non-residential construction remained the dominant force on the Slovak construction industry, accounting for approximately 48% of total Slovak construction output in 2010.
There was also a reduction in the number of employees in the Slovak construction industry in 2010, after five years of constant growth. Wages were not, however, substantially affected. After a significant slowdown in 2009, salaries in the construction industry were increased by more than 5% in 2010.
Road construction is likely to remain one of the main drivers which might help the country’s construction industry to stop its decline in 2011 and resume growth in the following years. At the same time, there is a promising list of projects on both the residential and non-residential markets. Many of them are expected to be delivered at least in part in 2011, and this would boost construction output.
The main opportunities for the Slovak construction industry in the next few years are expected to be the following:
- better use of new forms of funding construction, and PPP schemes in particular
- effective use of EU funds for construction
- increased investment in the subgroup of reconstruction, modernisation, repair and maintenance
- increasing focus of Slovak construction firms on foreign markets
- rationalisation of the organisational structures in Slovak construction firms
- tendency of the market to develop along two lines: one represented by large and medium-sized construction firms carrying out all kinds of complex, large projects, and the second consisting of firms which increasingly specialise in niche construction
the regrouping of the construction industry, prompted by the crisis, which is helping the industry to rid itself of companies which are weak in the areas of finance, human resources and technology.
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