Czech Construction Relatively Stable During the Global Downturn

Last year, although the Czech construction market seemed to be heading for a major contraction, the industry showed some signs of life and the value of the market eventually remained almost unchanged in comparison with the preceding year.
When almost all projects which relied on private funds ground to a halt last year, the Czech construction industry was expected to undergo a severe contraction, and its condition seemed similar to those of Slovakia, Romania and Bulgaria. As if the economic crisis were not enough, construction companies in the Czech Republic have been under constant pressure from the government to adhere to inspections and regulations pertaining to licensing and safety. Furthermore, the industry has experienced increasing pressure from clients to reduce costs and improve completion times.
In the spring of 2009, in an attempt to keep the construction industry afloat, the Czech government stepped in and adopted an anti-crisis plan to address the problems faced by the building materials and construction industries since 2008, and this had some effect on the construction market. Through this plan, the government increased its budget for the construction of transport infrastructure by CZK 8bn to CZK 90bn (€3.5bn) in total in 2009. The move was intended to stimulate demand for both construction work and the production of building materials.
In all, the domestic construction industry showed its relative strength and regained some momentum toward the end of the year. The value of the market eventually contracted by a mere 1% in 2009 and the decline adjusted to account for the number of working days was even less substantial: -0.6%. Indeed, the construction of buildings saw a steep, 7%, reduction throughout 2009 as a whole, but this fall was almost counterbalanced by the healthy, 14.3%, growth in civil engineering output.

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Most of this infrastructure work pertained to major transport projects around Prague and in Moravia. Some of these projects will continue during the next few quarters, and several new infrastructure projects, typically supported by the government and European funds, will be launched.
Key projects underway and proposed include:
– the construction of the D1, D3 and D11 motorways, in addition to the R4, R6, R35 and R52 expressways
– the upgrade of a 21-kilometre stretch of the railway between Prague and Plzen
– the improvement, double-tracking, electrification of, and new construction work on, a 19 km railway line between the centre of Prague and Prague International Airport
– a new, 10 km, fourth line of the Prague metro, at a cost of €1.6bn.
These projects will not, however, be sufficient to prompt a major revival on the construction market this year, as construction of buildings remains subdued. This is because property developers still find it difficult to obtain funding for their projects. Banks remain cautious with regard to the property market despite the fact that demand for property, including residential, continues to be relatively strong. The ongoing problems with liquidity will be overcome only after sentiment improves on the global financial markets.
This press release is based on information contained in the latest PMR report entitled „Construction sector in the Czech Republic 2010 – Market analysis and development forecasts for 2010-2012”.
For more information on the report please contact PMR:
Marketing Department:
tel. /48/ 12 618 90 00
e-mail: [email protected]