Boston, MA -- (SBWIRE) -- 06/04/2014 -- We believe Poland's construction sector will return to growth in 2014, following a steep 9% contraction in 2013. Growth will be modest however, as the country's infrastructure continues to feel the impact of the road building debacle, weighing on productivity, capacity and investor sentiment. However, a pick-up in the housing sector, and a new allocation of EU funding should see a turnaround in growth in H214 and boost the construction sector from 2015. As such, we expect annual average growth of 5.4% between 2015 and 2018.

Poland's construction sector experienced a 9% contraction in 2013, in line with our estimate for a 10% contraction, and wiping PLN11.8bn off the total industry value, while more than 300 companies in the industry faced bankruptcy - including some of the country's largest builders. While we expect growth to rebound in 2014, the impact of this is expected to persist over the first six months of the year at least, with reduced capacity, productivity and weakened investor sentiment indicating sustained weakness in the industry, and guiding our forecast for 1% real growth for the year.

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Over the course of 2014 we do expect sentiment to recover, and thus provide momentum for growth in 2015. This will be driven by government housing policies, as well as the EU 2014-2020 Multiannual Financial Framework. Poland will once again be the biggest beneficiary of EU funding, and much of this will be targeted at infrastructure - to bring Poland's quality of infrastructure in line with developed EU countries, as well as better integrate Central and Eastern Europe.

Key Trends And Developments

- Poland will receive up to EUR105.8bn under the EU's 2014-2020 Multiannual Financial Framework - this will include EUR72.9bn for Cohesion Policy. In line with EU goals to boost interconnectivity, and promote energy security, we expect funding will be directed predominantly to rail and road projects in the transport sector, and clean energy, transmission and distribution, and natural gas supply and transport infrastructure.
- We could see some threats to Poland's currently attractive wind power sector, following government statements in November 2013 it is seeking to reduce to the cost of renewable energy supplies by 40% in 2014. Plans include cuts to subsidies and fixed-price contracts. Similar moves elsewhere in the region have been damaging to investment. Plans are afoot to contract new renewables capacity via auctions, with the first one due in 2015. These have been successful in Latin America and Asia, however, they depend on cost parity between wind power and more traditional power sources.

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