Boston, MA -- (SBWIRE) -- 02/13/2014 -- Although economic fundamentals in Latvia remain fairly supportive, we see only modest opportunities for growth in the country's construction sector. We anticipate industry growth to slow over the forecast period, with average year-on-year (y-o-y) growth of 4.8% expected between 2014 and 2023. The residential and non-residential construction sector will gradually regain its dominance in the overall industry at the expense on the infrastructure sub-segment, which will struggle with limited funding.

In 2013, we estimate the construction sector to have grown by a further 9.0% y-o-y in real terms, as confidence in the sector is very much intact. The construction sector posted impressive growth during the first three quarters of 2013, with output up by 9.8% y-o-y, 5.3% y-o-y and 11.6% y-o-y respectively during Q113, Q213 and Q313, according to Latvia Statistics estimates.

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Key developments in the sector:

- The country's railways infrastructure will be boosted by the government's plans to upgrade its east-west railway corridor, which connects Latvian ports on the Baltic Sea with Russia and Belarus. In May 2013, the Nordic Investment Bank (NIB) signed a 10-year, EUR17mmn loan agreement with Latvian state railway company VAS Latvijas. The loan will be used to build a second track on the 52-kilometre (km) Skriveri-Krustpils section of the corridor.
- The Riga International Airport is undertaking construction work in a project estimated to cost LVL66.9mn, in order to increase its capacity. In November 2012, the airport awarded the contract for the project to a consortium comprising FCC, Hochtief and ACB. 61% of the total costs are to be met by the Cohesion Fund, while the remainder is to be financed by the airport. Completion is due by September 2014.
- In view of the growing public support towards renewable energy, Finnish power company Fortum, from September 2013, commenced commercial operations at a new Latvian power plant, reports Energy Business Review. The biomass-fuelled facility is located in the city of Jelgava and will provide approximately 85% of the district's electricity.
- The Latvian Ministry of Economics has made amendments to the power industry's law, calling for a limit on the support period and volume granted to wind and hydroelectric power projects in the country. This could mean that as many as 15 wind power stations could lose state support from January 2014, while the hydropower stations could lose support from 2018. In addition to this, the Latvian Cabinet of Ministers, in September 2013, approved the introduction of a Subsidised Energy Tax, which will be levied on renewable power or combined-heat-power (CHP) generating companies receiving financial support. If approved by Parliament, the tax will come into force from 2014 and run until end-

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