New Construction research report from Business Monitor International is now available from Fast Market Research
Boston, MA -- (SBWIRE) -- 12/19/2012 -- BMI View: We believe the Czech Republic's construction industry value will tentatively enter positive territory in 2013 as the European environment picks. However, we believe that caution should be exercised. Due to strained cash flow, a cap on public spending, a renewed freeze on EU funds and the repercussions of a tough financial climate, the risks are weighted to the downside. Although we expect the market to see positive growth from 2013 onwards (we forecast annual average real growth of 2.9% between 2013 and 2021), hopes of a robust recovery remain a distant possibility.
The factors underpinning our cautious outlook for the sector over the forecast period are:
- The transport infrastructure sector looks likely to post another year of contraction in 2012, followed by marginal growth from 2013 until the end of the forecast period in 2021. The lack of momentum is due to a cut in budget allocation, made worse as the next batch of EU funding has yet again been partially frozen, following unresolved allegations into reportedly corrupt tendering processes. Although a number of contracts (worth a combined US$1.7bn) have been awarded, without the EU's support, the government has little in the way of funds with which to pay for the work.
- A scheduled vote at the end of 2012 on divisive austerity measures will be a make or break situation for the government. If necessary steps are not taken, new elections could see the centreleft coalition come into power - which could potentially open up some more growth-oriented public spending on infrastructure. However, with much at stake, we believe the coalition will be incentivised to reach an agreement.
- The energy and utilities infrastructure sector continues to see key projects being delayed or suspended. In 2012, locally based utility provider CEZ revealed that it is examining the possibility of withholding the construction of three reactors, in addition to two planned units at Temelin nuclear plant, owing to legal restrictions. The move is likely to cut spending on the project by up to US$15bn. The Temelin expansion project has already been delayed by around two years, and there have been no assurances that the delays will not continue.
- It is believed that the country's residential and non-residential sector painted a bleak picture in 2012, with a contraction of 4.3% estimated for the year. However, we anticipate a slow rebound, with annual average real growth of 3.4% forecast between 2013 and 2021.
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