20 Aug 2020
Posted in Construction
Driven by investments in transport infrastructure, construction industry output in Czech Republic set to grow to US$38.5bn by 2024
The Czech construction industry had been struggling in 2019, but was expected to turn a corner in 2020; however, the COVID-19 outbreak and associated containment measures have impacted the industry and it is now expected to post a contraction of 2.2% in 2020. The industry is expected to recover in 2021 and grow at an annual average rate of 2.4% during 2021-2024. Consequently, the industry’s output value, measured at constant 2017 US dollar exchange rates, is expected to reach US$38.5bn in 2024, says GlobalData, a leading data and analytics company.
While the economy contracted in the first quarter, construction output grew by 2.5%. However, in the second quarter, the construction industry is expected to have weakened. The country’s seasonally adjusted average construction production index fell by 0.6% year on year in the first five months of 2020, with the decline in the buildings sector being offset by growth in the civil engineering segment.
Danny Richards, Economist at GlobalData comments: “Assuming that there isn’t a second wave of infections in the country in the second half of the year, the industry is expected to return to positive growth, with the government seemingly prepared to push ahead more quickly with infrastructure spending plans. The Czech government has included spending on transport infrastructure as part of its COVID-19 support package, which will boost growth in the industry and improve employment opportunities.”
To revive the economy by boosting investments and supporting jobs, in July 2020, the Chamber of Deputies – the lower house of the Czech Parliament, approved a proposal to increase the state budget deficit for 2020 to CZK500bn (US$22.1bn) – sharply up from CZK40bn (US$1.8bn) planned earlier in February 2020. Through this, the government plans to support the municipalities and regions by contributing to the repair of roads and increasing the amount of funds made available for investments by the State Transport Infrastructure Fund. This will provide a boost to the construction industry in the short and medium term.
Richards adds: “Over the longer term, investments will be driven by the government’s National Investment Plan, released in December 2019, which proposed an investment of approximately CZK8 trillion (US$353.4bn) on 20,000 projects by 2050. The investment majorly focuses on transport infrastructure projects, with the Ministry of Transport receiving 77.4% of the total allocation – equivalent to CZK6.2 trillion (US$273.9bn) – 50% of which is expected to be invested by 2030.”