Construction will decline next year as well, by up to six percent

Prague - After this year's anticipated year-on-year decline in Czech construction by as much as eight percent, its performance will decrease next year as well. This is predicted by most analysts contacted by ČTK. They expect a decline of up to six percent. The reason, they say, will be investor uncertainty regarding future developments due to the current crisis.

"In construction, the uncertainty arising from the pandemic situation is more heavily felt than in other sectors, leading construction entrepreneurs, construction companies, and developers to suspend and cancel some projects. Due to a relatively high degree of inertia, the sector will noticeably decline next year as well, by about six percent. It will not return to growth until 2022," said Trinity Bank analyst Lukáš Kovanda.

According to ČSOB analyst Petr Dufek, in addition to companies cutting investment spending, local governments will also start to limit investment activities. They will approach investments more cautiously due to the risk of lower tax revenues and similar concerns, he stated. "Although construction contracts do not look bad, there is no guarantee that all will be realized. Therefore, I would not expect that the shortfall from this year will be made up for starting in 2021," Dufek added.

Construction companies in the Czech Republic had the highest number of contracts at the end of September since 1999, when data became available. Year-on-year, their number increased by 4.1 percent to 21,324. The value rose by 12.8 percent to 199.7 billion crowns. However, this only concerns firms with 50 or more employees. "Larger construction companies with more than 50 employees have more than enough contracts, but they are struggling with a shortage of suitable labor, often foreign. This does not generally concern smaller construction firms, so the construction sector will also experience a noticeable decline next year," Kovanda further stated.

UniCredit Bank analyst Pavel Sobíšek stated that if investors become more optimistic during the next year, it will take time for this optimism to translate into a higher volume of construction work. According to him, production will decline by at least five percent next year. Komerční Bank analyst Jana Steckerová expects a decline of 5.8 percent.

BH Securities analyst Štěpán Křeček anticipates that construction will return to growth next year. "The economy should gradually be free from the fear of coronavirus thanks to vaccines, and everything will begin to return to normal. High prices in the real estate market will motivate the construction of new properties. However, this will encounter poor building regulations in our country, which significantly prolong construction and increase costs," Křeček added.