Slovenian construction market to stabilise at €1.5bn in 2013

After the weak period between 2009 and 2012, the Slovenian construction market will stabilise in 2013. Since late 2010 a modest positive trend has lifted Slovenian construction business confidence and this has continued into early 2013. Confidence is still negative but there are signs of improvement and this is a cause for optimism for 2013-2015.
According to research company PMR’s latest report, “Construction sector in Slovenia 2013 – Development forecasts for 2013-2015”, after an average 17% drop per year in the period 2009-2011, the market also fell in 2012, by approximately 13%, to slightly more than €1.5bn. Latest development forecasts for the Slovenian construction market remain quite unclear. There are positive signs for some segments while others are still a cause for concern. For 2013 PMR analysts expect the market to stabilise at the 2012 level.

The most promising developments are expected in civil engineering construction where the Slovenian government has plans for infrastructure investment (e.g. hydro-power stations on the River Sava and railway track modernisation) in the period 2013-2018. In the engineering sector PMR’s analysts see 2013 as a year of gradual output turnaround. Projects under construction or planned in 2013 in the railway and industrial construction segments keep them optimistic about Slovenian civil engineering in 2013-2015. And 2013 is expected to be a positive year overall with nearly 6% growth. After a weaker 2014, a positive trend is expected again in 2015 showing a healthy recovery for civil engineering.
In the period 2013-2015, the most positive trend will be seen in industrial construction. This has already contributed to a lower drop in total civil engineering output in 2012 and will be one of key drivers for market recovery in 2013-2015. The industrial construction segment has a lot of projects to develop in the coming years but, what will be most important is the construction of the second reactor in Krsko at a cost of €3.5-5bn in the 2014-2020 period.
In residential construction there is still a negative trend with a decreasing number of housing starts and building permits being issued. After an approximately 20% decline in 2012, residential construction output will continue to be under pressure in the period 2013-2014. In 2015, the residential construction business will begin with a modest improvement. PMR’s conservative estimate is that residential construction output will bottom at around €150m.
Non-residential output is also in a negative trend with no improvement in investment in new commercial buildings. After a 15% decline in 2012, non-residential construction output will struggle further in 2013-2014 and is expected to decline at 10% per year. In 2015 non-residential construction will begin a modest turnaround. PMR estimates that non-residential construction output will bottom out at around €400m. Industrial building and warehouse construction will react to positive market movements first. According to PMR estimates industrial buildings and warehouse construction will contribute positively to a non-residential output resurgence in 2014 and 2015.
It is worth noting that in 2011-2012 the number of companies trying to get new construction business increased. The main reason for this was that all the country’s largest companies went bankrupt which left the field clear for small and medium-size companies to bid for new construction business. In the coming years the absence of large companies will attract the big foreign construction companies to enter the Slovenian market. If the government goes ahead with railway modernisation projects, foreign companies are likely to be interested in bidding for tenders in collaboration with local suppliers.
Source: PMR