Analysts: The construction industry will still need public investments

Prague - The construction industry will need investment activity from the public sector in the coming months to prevent a decline. It may still be lacking foreign workers, although some may transition from other industrial sectors. This was stated by analysts contacted by ČTK today. While construction dropped by 4.6 percent in April, industrial production fell by more than a third. According to analysts, construction can dampen the expected economic downturn following measures against the coronavirus.

"Construction has a good chance of remaining in a positive mode, but only on the condition that high investment activity from the public sector can be maintained. The private sector is likely to cut its investments, as already shown by the developments in the first quarter," stated ČSOB analyst Petr Dufek.

The impact of the coronavirus epidemic was particularly negative in building construction, which includes the construction of apartments, offices, or warehouses. It decreased by 10.5 percent in April. In contrast, engineering construction, which largely includes transport infrastructure, increased by 13.5 percent in April. Overall, construction fell by 0.1 percent during the first four months. Building construction decreased by 3.8 percent, while engineering increased by 14.7 percent.

According to Natland analyst Petr Bartoně, a gap in both basic branches of construction can be expected to continue. "The state is likely to decide, in the tradition of Charles IV's 'hunger walls,' to support the economy with even higher government contracts for infrastructure during the crisis. However, frozen building offices will continue to hinder the construction of apartments. Furthermore, builders may face worsening access to financing, as banks are likely to demand even greater guarantees in times of uncertainty," he stated.

The April decline may be due to restrictive government measures that prevented contact between people and could thus be a one-off situation, according to Komerční banka analyst Martin Gürtler. "A limiting factor for further developments in construction will likely be the shortage of foreign workers, on whom Czech construction relies. It will also be important whether investments from the government sector continue, a significant portion of which consists of investments from local authorities," he warned.

According to Czech Found analyst Lukáš Kovanda, entrepreneurs in construction or developers could benefit from finding suitable Czech workforce more easily, often consisting of people laid off in industry. "These workers could significantly replace the shortfall caused by the outflow of foreign workers, such as Ukrainians. This will allow construction entrepreneurs to keep labor costs comfortably in check and be competitive. This, in turn, will enable the construction industry to more easily survive the significant economic downturn, even recession, that Czechia is currently facing," Kovanda added.