Analysts: The growth of construction is hindered by poor preparation of large projects

Prague - Czech construction is slowing down its larger growth due to the unpreparedness of major infrastructure projects. However, during the year, there should be an increase in these contracts. This was stated by analysts whom the ČTK agency contacted today. According to some of them, construction could grow by almost a tenth this year. In the first quarter, it grew by a total of 11.1 percent.

"Unusually warm January weather allowed for an earlier start to this year's construction season than usual. Such high growth as in the first quarter has not been seen for a long eleven years," said analyst Jan Vejmělek from Komerční banka.

He further stated that the construction sector is primarily driven by the investment activity of the private sector. "Conversely, the persistent low investment activity of the public sector is dragging down engineering construction; the preparation of large infrastructure projects is stagnating. However, the successful entry of the construction sector as a whole into this year is essential for achieving double-digit growth for the entire year," Vejmělek added. He expects growth of 9.8 percent for the entire year, which would be the best result since 2001.

According to analyst Lukáš Kovanda from the company Cyrrus, after a successful start to the year, construction lost momentum in March, declining by 0.7 percent year-on-year. "Partly, the reason for this is the higher comparative base from last year. This year's relatively warm winter allowed for relatively strong construction production in January and February, which is why the March performance of the construction sector may appear weaker," Kovanda stated.

He anticipates that higher investment activity from both the private and public sectors will support construction production. "The preparation of large infrastructure projects remains weak, but the budgets of local governments show significant surpluses, which could potentially be partially used for investments this year. Additionally, the Czech Republic will be forced to draw some European funds this year; otherwise, it will lose them for good," he warned. He expects growth in the sector of about 9.1 percent for this year.

According to ČSOB analyst Petr Dufek, the beginning of the year was influenced by more favorable weather than last year. Furthermore, given the minor significance of January and February in the annual statistics, he believes that these figures will not significantly impact the overall results. In the first two months, construction rose by more than a fifth altogether. "For the upcoming months, we expect a gradual increase in construction output. This is indicated not only by an improved sentiment among builders but also by statistics on new contracts, which are starting to manifest even in engineering construction. If these contracted projects can truly begin to be realized and if there are enough employees, the construction sector can expect two quite favorable years," he added. For this year, he estimates sector growth of around three percent.

The president of the Association of Construction Entrepreneurs in the Czech Republic, Václav Matyáš, stated that the influence of the high growth in awarded contracts has not yet manifested itself. According to data from the engineering company ÚRS Praha, public investors awarded construction firms 1,201 contracts worth 41.6 billion crowns in the first quarter. Their value increased by 76 percent year-on-year. "Favorable weather in the upcoming months and hopeful data on awarded contracts may fill builders with optimism once again this year," Matyáš concluded.