Analysts: Construction can be a driver in reviving the economy

Prague - The construction industry can be a driving force for the economic recovery once the measures against the spread of the coronavirus are lifted. It is not so dependent on foreign trade. This was stated by analysts contacted by the Czech News Agency today. According to them, the impact of the current crisis on construction cannot be quantified yet. They added that the construction industry will face a decline in contracts because people will postpone large investments, such as building houses.

"I think it is not possible to seriously quantify the impact not only on construction but on any other sector at this moment. The construction industry had quite a good start to the new year and a solid backlog of orders that ensured work for many months ahead,” said ČSOB analyst Petr Dufek. According to him, construction companies will now struggle with the availability of employees and materials. Any disruption in the supply chain will mean a problem, he warned.

"If the public sector maintains the will to invest and does not cut back, construction can play a significant role in restoring economic growth after the coronavirus subsides. The Czech Republic will need a fiscal stimulus, and construction could be one of its beneficiaries," added Dufek.

According to Czech Fund analyst Lukáš Kovanda, construction shows considerable inertia, greater than industry. "Permitting and other construction processes are too lengthy, forcing construction entrepreneurs to plan long in advance. A relatively short economic downturn, even a brief recession, should therefore harm construction less than industry," he stated.

According to him, the coronavirus will "ease life" for entrepreneurs in construction or developers in the sense that they will find suitable labor more easily, as it will often be about people laid off from industry. This will allow construction entrepreneurs to keep wage costs in check and remain competitive. "This, in turn, will enable the construction industry to survive the noticeable economic downturn, even the recession that the Czech Republic is now expecting. Construction can be an engine of the economy that pulls it out of recession or at least dampens the recession," said Kovanda.

UniCredit Bank analyst Pavel Sobíšek added that construction is a sector with the greatest expected immunity of demand against the effects of the coronavirus, at least in the short term. "Construction companies have a solid backlog of work, and developers will not change their long-term plans overnight. The state, hopefully, will not start cutting back in the wrong places. As a result, the sector will feel the demand impacts only after some time, with a lower influx of new contracts," Sobíšek stated.

According to BH Securities analyst Štěpán Křeček, the analytical estimates published at the beginning of the year are today outdated and have no informative value. He believes that construction will struggle with a decline in contracts because people will postpone large investments like building houses. The logistics of construction companies will also be affected, as it will be difficult for them to meet set deadlines for delivering completed buildings.

"The biggest long-term danger for the Czech economy will be if top officials attribute the economic decline solely to the virus. That would only delay the necessary reforms. The economic downturn actually began long before the virus," added Natland analyst Petr Bartoň.