EECFA has again examined the main changes in the prospects between the Autumn 2020 and Spring 2021 Macro Forecasts of the European Commission for those EECFA member countries which are covered by this forecast; Bulgaria, Croatia, Romania, Russia, Serbia, Slovenia, Turkey, plus Hungary.
Written by Bálint Parragi, EECFA Research, ELTINGA
After a severe recession during last year, the global economy as a whole could grow again in Spring 2021, and it is expected to continue doing so. As the first chart shows, GDP in all countries could recover fast and return to an increasing trajectory.
In Autumn 2020, projections showed the majority of the countries in the EECFA region with a stagnating or very slowly increasing economy. This was mainly due to the composition of the 3-year-average comprising a year with a very deep recession, and the two upcoming years with cautious estimations of growth. The only two economies with growth exceeding 1% were Serbia and Turkey (2.3% and 2% respectively) as these economies shrank least in 2020 (-1.8% and -2.5%).
On the other hand, the results are quite different in the European Commission’s Spring 2021 report where every EECFA country registers a positive GDP growth with all of them being at least 0.5%. The order of countries is almost identical to the one in Autumn 2020 and we can see a grouping of countries:
The first one is the group of the highest growing two countries, Serbia and Turkey again. This time, Turkey has a higher average growth, though (+3.7% and +2.8% respectively). The significant growth is the result of the slight contraction (or even growth) during 2020 (-1% in Serbia and +1.8% in Turkey).
The second group consists of countries with a negligible growth according to the Autumn 2020 report (+0.4-+0.7%) but with a more remarkable increase projected in Spring 2021; above 1% in each case and reaching 1.5% in Romania, Hungary, and Slovenia.
The economies in the last category: Croatia, Russia, together with the EU, all decreased according to the Autumn 2020 report, but in the Spring 2021 report it seems that they have better prospects in the future as they may grow to a little extent (+0.5-+1.1%).
When it comes to total investment (gross fixed capital formation) data, two general conclusions can be drawn:
Firstly, the projection in Spring 2021 is higher for every country than the Autumn 2020 values. The upward revision is especially remarkable for Turkey, Croatia, and Romania. This again could mean that economic recovery is expected to be a rapid process.
Secondly, the expected GFCF growth is positive in every country in 2021, except for Russia where it is close to zero. However, the countries are not homogeneous as Romania, Serbia, Turkey, Croatia and Slovenia have an expected growth within 4%-6%, but Hungary, Bulgaria, and Russia, as well as the EU, has a growth smaller than 2% (average of 2020-2021-2022).
Construction investment growth (where available – click the arrow on the chart above) has been revised upward everywhere, but while in Bulgaria it has grown by just 0.4 percentage points, it has multiplied in Hungary, Slovenia and Romania. For the latter, it has even exceeded 8% per annum. Construction’s share in total investment in EECFA countries and Hungary ranges from 55% (Bulgaria) to 64% (Romania), with Hungary and Slovenia in between (62% and 59%, respectively).
All these represents the Commission’s opinion. If you are curious about our opinion on Eastern European construction markets or you need construction forecast on segment level, please consult with the latest EECFA reports. For a sample report and order, visit eecfa.com
Before the 2020 Summer EECFA Construction Forecast Report was published, the European Commission released its forecast for the economic prospects for EECFA member countries. The main changes in prospects between Autumn 2019 and Spring 2020 have been collected in this article.
Written by Bálint Parragi, EECFA Research, ELTINGA
In Spring 2020, the global economy as a whole has been hard hit and shrunk due to the coronavirus pandemic, marking the end of many quarters and years of economic growth. According to data depicted on Chart 1, every country’s GDP growth decreased, but not to the same extent.
The countries having experienced high GDP growth (higher than 2.5% per annum) in Autumn 2019 are still growing, but very much less than before. Romania and Bulgaria have the highest absolute decrease with approximately a reduction of 3% and 2.5%, respectively. The economy of Serbia and Euroconstruct member Hungary slowed down too, but not as drastically as that of their eastern neighbours, so they have the highest GDP growth among these countries. Where growth was less and reduction was the same, the crisis created a stagnating or even shrinking economic status such as in the Euro Area, the EU and Turkey. The Russian economy even suffered a significant negative shock with a value of -0.7% per annum. All in all, EECFA countries still have a higher GDP growth than the others.
Looking at the gross fixed capital formation data (Chart 2), the situation is a bit different, but decreases are general. According to expected GFCF growth, Serbia lost little to its previous period value, ranking high above all other states. While Romania experienced a moderate drop, annual GFCF growth has nearly come to zero in Hungary, Croatia, Slovenia, the EU (the Eurozone as well) and Russia. The greatest falloffs are connected to Bulgaria and Turkey whose previous period value was by far the lowest and the only negative value among the examined countries.
Total construction growth has been revised downward everywhere, but while in Romania and Hungary it stayed positive (3-4%), it has come to zero in Slovenia and turned into negative value in Bulgaria, around -5% per annum. Construction’s share in total investment in the EECFA countries ranges from 57% (Slovenia) to 62% (Romania), with Hungary and Bulgaria in between (61% and 59% respectively).
For construction segment level forecast, please consult with our latest reports issued on 29 June that can be purchased on eecfa.com
Written by Andrey Vakulenko – MACON Realty Group, EECFA Russia
Assessing the development of construction industry on national scale is practically impossible without high quality statistical data that allow us to draw conclusions on industry trends and create any forecast model. The quality of Russian official statistics and its reliability have increasingly been becoming the subject of public discussion and the work quality of statistical service has been questioned by independent experts and economists. To overcome the problems, at end 2018, a comprehensive plan was developed for the reform and modernization of the Russian Federal State Statistics Service (Rosstat).
In 2018 the Russian economy seemed to have registered the highest growth over the past 6 years. According to Rosstat, GDP grew from 1.6% in 2017 to 2.3% in 2018; the highest value since 2012 (+3.7%). Such pronounced growth came as a surprise since all official and unofficial forecasts were much less optimistic: an average of 1.5%-1.8%. To a large extent, the successes of the Russian economy in 2018 derived from artificial manipulations, i.e. Rosstat’s review of the growth rate of the construction sector in 2017-2018. The indicator of the volume of construction works completed over 12 months has drastically changed: 2018 was to amount to RUB 8.4 trillion, 5.3% higher, or RUB 422 billion higher (at current prices) than in 2017. It was astonishing as previously Rosstat estimated construction works for 11 months of 2018 to post a modest growth of 0.5%. The 2018 growth in construction was a record for the last 10 years: it was only in 2008 when the sector grew at a higher rate (by 12.8% per year). On the contrary, between 2014 and 2017, construction industry saw a steady decline, which, according to official statistical calculations, gave way to a rather sharp increase in 2018. The final contribution of the construction sector to Russian GDP in 2018 was 0.3pp, although in 2017 it was previously negative (-0.1 pp). Such drastic changes caused a wide discussion for the following reasons:
Weak argumentation for revising statistics. The Ministry of Economic Development and Rosstat recalculated construction data in late 2018 and early 2019 on grounds of clarifying previously submitted information by respondents at the end of the year. (This is due to the peculiarities of statistical accounting in construction in Russia: the peak of completions is at the very end of the year and then statistics are updated for a long time. Final data for the reporting year are published in spring and some figures may be adjusted retrospectively for a longer period). However, in this case, Rosstat adjusted the data by RUB 565bln, referring to only one project (Yamal LNG), which adds only RUB 241bln. The artificial increase in the indicator couldn’t be explained by only one project in one region, but Rosstat did not voice other official explanations.
Growth of indirect construction indicators. Volume of completed construction works posted a massive rise against the backdrop of a decline in many industries related to construction, for example, in the production and transportation of building materials. In 2018, rail transportation of building materials for the year decreased by 6.8%, cement transportation also fell by 6.5%, cement production shrank by 2%, brick production dropped by 4.8%, and the construction of metal structures saw a 1.5% slump. Thus, according to Rosstat, production and transportation of building materials dipped, while more construction works were carried out. An important indicator here is also growth in the volume of housing completion, the most capacious segment of the Russian construction industry, which at end 2018 showed a steady decline by more than 4% (and by 6% in the multi-unit segment).
Administrative reasons. In 2017, Rosstat, previously a fully independent agency under the Government, became subordinate to the Ministry of Economic Development. This created an internal conflict of interest since Rosstat data directly or indirectly indicate the effectiveness of the Ministry and the reliability of its forecasts.
EECFA’s Russia Construction Forecast Report with detailed analysis and forecast for the construction market of Russia can be ordered on http://eecfa.com/
Over the last year, official statistics was at the center of public discussion in the scientific community due to regular adjustments and revisions. And construction is not the only area of statistics affected by data manipulation, there are examples for other important macroeconomic indicators being revised:
At end December 2018, Rosstat significantly improved data on Russia’s GDP growth rate in 2015-2017. The new estimate showed that in 2016 the economy expanded by 0.3% despite the previous drop of 0.2%. GDP growth in 2017 also turned out to be adjusted, although less: +1.6% instead of +1.5%. Decline in 2015 was also less than originally indicated: -2.3% instead of -2.8% (the first estimate by Rosstat was -3.7%). The recalculation was associated with obtaining newly revised data.
In October 2018, public attention focused on published data on the real income of the population for January-June 2018, which, as per Rosstat, in the whole country rose by 2.4%. However, 6 out of 8 federal districts registered negative growth (from -1.6% to -0.4%), and the income growth of the population in the remaining 2 districts was +0.5% and +2.0%. The apparent contradiction in statistics was not explained in any way, and from early 2019, Rosstat switched to a new methodology for calculating population income and recalculated all data on this indicator from 2013. As a result, it turned out that in 2013-2018 real income decline was 8.3%, instead of 10.9% (previous estimate), and in 2018, the initial drop of 0.2% was replaced by a rise of 0.2%. Thus, growth rate of the real income indicator has been revised upward.
Rosstat’s recent upward revision of industrial production data for 2016–2018 also raised many questions. Instead of stagnation in the industry in recent years, new statistics began to show moderate growth. For example, at end 2017, Rosstat estimated growth in industry at +1.0%, but after the revision at the level of +2.1%. Similarly, data for 2016 were revised upward. It was an interesting coincidence that Rosstat was fully in line with the forecast of the Ministry of Economic Development published even before the final results of 2017 became known.
In 2019, Rosstat conducted a radical revision of macroeconomic statistics since 2014. The losses of the economy from the “sanction war” and the slump in world oil prices were exaggerated and the economic recession was slight and short-lived. According to newly recalculated data, there was neither a long economic downturn, nor a big recession in industry and construction, and 2015 was the only crisis year.
Large-scale revisions by Rosstat, the wide range of indicators that they affect, their upbeat nature (indicators are only revised upward) and the often insufficient or unconvincing argument behind raise doubts in all who use these data. Refinement of statistics and revision itself is a normal practice taking place in any country, any revision though should have a clear and understandable explanation, and if such adjustments frequently occur, the question of the quality of applied methodology for collecting and analyzing statistical data arises.
Periodic revisions of statistical data in construction and other sectors of the economy are not the only difficulties. There are weaknesses not only in the statistical office itself, but also in the whole system of collecting and publishing statistical information in Russia such as:
In Spring 2019, prior to the publication of the 2019 Summer EECFA Construction Forecast Report, the European Commission released its forecast for the economic prospects for EECFA member countries. Here is a summary of the main changes in prospects between Autumn 2018 and Spring 2019.
Written by Tünde Tancsics, EECFA Research, ELTINGA
Economic outlook is still better in the eastern region of Europe than in the rest of the continent, though it has slightly worsened in many countries of the EECFA region between Autumn 2018 and Spring 2019. The only exception among EECFA countries is Russia whose prospects have improved, as well as Hungary (covered by Buildecon in Euroconstruct) with almost 0.4 percentage points.
As Chart 1 shows, GDP growth in the eastern region is higher than the EU average, Turkey excepted where forecasted average annual GDP growth for 2018-2020 remains under 1.5%. As per data by the European Commission, economic prospects are the best for Hungary and Serbia that may see an increase in GDP by more than 3.5% annually between 2018 and 2020.
We have also examined Gross fixed capital formation increase in EECFA countries, in Euroconstruct member Hungary and in the EU. Chart 2 indicates that expected GFCF growth – as in case of GDP – is also higher in most EECFA countries. Moreover, the advantage of Serbia, Croatia, Hungary, Slovenia and Bulgaria is even bigger than the one experienced for GDP. GFCF prospects have greatly declined for Romania; average annual GFCF growth rate for 2018-2020 has shrunk close to zero by Spring 2019 from more than 5% in Autumn 2018. However, among EECFA countries Turkey is the only one where GFCF is set to decrease in 2018-2020.
Hungary is still leading in GFCF prospects with a nearly 10% projected annual growth rate. Slovenia ranks second and Serbia lines up third with both having an 8% growth rate. Hungary has come first in terms of predicted growth of construction investment (15%). Construction’s share in total investment in EECFA countries is between 57% and 65%, with Turkey having the highest rate. Romania also has a high rate of as much as 64%.
For construction segment level forecast,please check our reports that can be purchased on eecfa.com
Before the publication of the 2018 Summer EECFA Forecast Report, the European Commission released its spring forecast, revealing the prospects for almost all EECFA member countries. Let us highlight the main changes in the prospects over the past half year.
Written by Aron Horvath, PhD, EECFA Research, ELTINGA
Chart 1 shows that GDP growth is higher in the region than in the EU, so the economic outlook is still better in the Eastern region. Looking at the individual level, the only exception is Russia, where economic growth is set to remain under 2 percent according to the Commission. As for the rest of the countries in the region, the expected growth is between 2.75 and 5.5 percent. Turkey and Romania lead the group with an over 5 percent forecasted economic growth.
Robear is helping to revolutionize the manufacturing industry: do robears prefer China or Europe? (source: HuffingtonPost)
Adidas has announced that it will open its first all-robot factory in Germany, and many will follow in rich countries. Foxconn, the manufacturer of Apple products fired 60,000 employees and employed robots instead of them. It seems this is the beginning of the end.
The way we manufacture products is about to change dramatically in the next decade. There are two intertwined trends that have already started to revolutionize the industry: the digitisation of industry (or the “takeover of robots”) and that global economic growth is less and less energy and machinery-intensive (more and more value added comes from services). None of these are new; however, both of these trends are in front of a new era of growth. Developments in big data and machine learning are increasing the capabilities of robots and global value chains are becoming seamless. Economic growth is coming increasingly from services, as opposed to manufacturing. Moreover, growing concerns about climate change and the ongoing shift away from heavy machinery in state-of-the-art manufacturing are leading to the growing use of lighter materials instead of metals. Continue reading New manufacturing is coming: Europe or China will be the new China?
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The Spring Forecast of the European Commission has been released, and it covers EECFA member countries: Russia, Turkey, Romania, Serbia, Slovenia, Croatia, and Bulgaria, it only lacks Ukraine from the EECFA’s coverage. The EC forecast is intensively used in the EECFA reports for assembling the macro-economic environment, and also as a demand driver in specific segments. For example, consumption leads the demand for commercial buildings in the long run, or office sector’s employment drives the need for office buildings.
In this short note we are presenting the key facts about the EECFA countries in the Commission’s report, looking at how macro forecasts have changed since 2015 Autumn.
Chart 1 GDP growth forecast of EECFA countries and the EU (average 2015-2016-2017) Source: EC
Chart 1 presents the general economic outlook in the relevant countries – GDP growth from 2015 until 2017. Turkey leads the group with a close to 4% growth, even better prospects than in autumn. Romania and Bulgaria perform better than the EU average. Serbia and Croatia are lagging behind, while Russia is in a serious recession period in the forecast horizon.
In most of the countries of the region, economic outlook has improved since the latest forecast in Autumn 2015. The biggest change in the expectation was in Bulgaria, where forecasted GDP growth increased from 1.7 to 2.5 percent between Autumn 2015 and Spring 2016. Despite the positive outlook of EECFA, we can’t be optimistic regarding Russia where GDP is likely to shrink in the next 2 years; moreover, the rate of decrease has surged since Autumn 2015.
Chart 2 The Gross fixed capital formation growth, and if available the building construction growth (average 2015-2016-2017) Source: EC
As it can be seen on chart 2, gross fixed capital formation growth is high in EECFA, which can be explained by the GFCF’s pro-cyclical characteristic. Serbia and Romania have the biggest GFCF growth rate among the examined countries, where GFCF is set to go up between 6.8-7.8 percent. In Turkey and Croatia the estimated growth is between 2.5-3.8 percent; in Slovenia and Bulgaria growth can be between 0-2 percent. The only country where GFCF declines is Russia; the expected shrinkage is near 4 percent.
Written by Aron Horvath, PhD, Head of Research, EECFA, ELTINGA