A visual summary to Euroconstruct Special Update August 2020

by János Gáspár – Buildecon, Hungarian member to Euroconstruct

In most countries the stories after the August revision remained pretty similar to those Euroconstruct forecast in June. Charts below are organized by region, the dotted black line represents the 2019 level. At Europe’ heartland and in the Nordic countries (in the top row) there are very stable markets. Except for Finland and Sweden, each of them foresees the total market in 2021 to be around the level of 2019. Out of the largest countries, the most sluggish recovery could be in the Netherlands, in the UK and in Spain. Poland seems to be crisis-resistant.

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Turkey: Despite Covid-19 housing transactions historically peaking

In the midst of the pandemic, Turkey’s housing transactions are booming. Here is the answer why.

Written by Prof. Ali TUREL, EECFA Turkey

The pandemic in Turkey

Covid-19 has caused various problems in the Turkish economy, like in many other countries. The Government had to introduce a series of precautionary measures from mid-March onwards. Schools, universities, and many commercial establishments were closed. Factories and most construction sites had to stop work or reduce the number of workers. Many people lost their jobs that had to be compensated by the Government through allocating large sums of money. Many establishments got into financial difficulty, and rescue plans had to be put into effect in the forms of providing loans and deferring tax and other payments to public institutions. Demand for many goods and services, including real estate, shrank under the Covid-19 pressures.

Industrial production slumped by 6.8% in March, 30.4% in April and 19.5% in May 2020 from the same months of 2019. Some recovery occurred only in June by a 17.6% rise from the previous month and a 0.1% growth from the same month of 2019. Building construction was also hit by Covid-19, as at the end of Q1, building construction permits in floor areas total were 11.4%, occupancy permits 41.1% down from Q1 2019. The number of completed dwelling units was 152 thousand with a 39.5% drop against Q1 2019.

Building construction industry also appears to enter the recovery process in Q2 with a 40.8% growth in the first 6 months of 2020 from the same 6 months of 2019. Completions, however, registered a 32.5% falloff in January-June 2020 compared to the same period in 2019, most likely because of the Covid-19 effects, although there are big backlogs of construction in almost every segment. The completed number of dwelling units with 269 thousand was about 70% of the 6-monthly rise in the number of households in Turkey.

Stimulus measure

In a bid to stimulate housing transactions, the Government introduced a measure in June 2020, according to which the loan-to-value ratio in residential mortgage loans was increased to 90%. The three state-owned banks were to offer mortgage loans under market interest rates and with a longer repayment period: 0.64%/month for new housing, 0.74%/month for used housing, both with a 15-year repayment period when the annual rate of increase in the Consumer Price Index was 12.62% in June 2020.

The stimulus measure greatly influenced the national housing market. The number of dwelling units sold in March-April 2020 came down to 42,8 thousand and 50,9 thousand, respectively. After the announcement, 190 thousand dwelling units were sold in June and 229,4 thousand in July, implying 209.7% and 124.3% rises from the same months of 2019, respectively. The number of transactions in July was the monthly historical peak, while in June the second monthly historical peak in Turkey.

In June and July 2020 together, 419.369 dwelling units were sold, 232.222 of which (55.4%) on mortgage loans. It is possible that not all applicants were able to use these credits. The ratio of mortgage financed housing to total housing sold was 12.5% in the same two months of 2019. Equity financing was still important with a 44.6% share (187.144 dwelling units) in June and July this year. It appears that people consider investing on housing as a hedge against inflation when all commercial banks offer negative real interest for deposit accounts. 

It has been a much-discussed issue in the media whether offering mortgage loans by state-owned banks under market interest rates would contribute to the clearance of the unsold newly built housing stock. The total number of first sales in June and July 2020 together was 126.569, 30.2% of total sales. The relatively higher price of newly built housing than that of the existing housing stock could be a factor keeping first sales at a 30% level. A media outlet suggests that about 24% clearance of the stock occurred by first sales in June and July this year.

The policy of offering mortgage loans under market interest rates contributed to the big revival of housing demand that had greatly decreased due to Covid-19. Since an interest rate subsidy at that level would unlikely continue for a long time, it will be interesting to see how the housing market will return to its usual course in the following months.

Construction forecast for Turkey is available in the latest EECFA Forecast Report Turkey which can be purchased on eecfa.com

Figures on the pandemic impact on Hungarian construction

Press Release on EBI Construction Activity Report Q2 2020 – Hungary

When assessing the first quarter of 2020, analysts of EBI Construction Activity Report Q1 2020 already highlighted the impact of the pandemic on the Hungarian construction industry. Back then, they did it with the help of a forecast based on limited available data, but since then actual data have been released and the impact of the pandemic on the sector can be assessed in detail.

Prepared by Buildecon, Eltinga (creation of indicators and development of algorithms for aggregation) and iBuild (project research and project database), EBI Construction Activity Report examines the domestic construction industry on a quarterly basis, including the volume of newly started construction works, and the value of projects completed in a given quarter by aggregate and by subsector as well. Owing to the pandemic, the analysts of EBI decided to follow the changes affecting the construction industry even more closely and run a monthly update of the EBI visualizations for Start, Completion and the resulting Output for each segment. Full publications can be purchased at ebi@ibuild.info.

In Hungary, the pandemic imposed major restrictions from mid-March on, which only slightly affected construction works starting or getting completed in Q1 2020. However, April and May were marked by severe measures. Figures for the second quarter of the year show that even though the pandemic had had an impact on the sector, there was no drastic fall. It is certain that construction projects did not start at such a low value in Hungary since the last quarter of 2016, and there was a big slump against the beginning of 2020, but compared to the figures of the last and first quarters of 2019, the difference is not so much. It is therefore worth taking a closer look at exactly which segments saw a downturn, as some of the drop may have been caused by other market processes in addition to the pandemic.

While in Q2 2020 construction works started in the construction industry on a total value of HUF 418 billion, in Q1 2020 this figure was HUF 606 billion. Thus, a strong start to the year (an increase over the end of last year) was followed by a 30% decrease. Yet, the renovation works of M3 metro line and the next phase of the Samsung project in Göd started in Q1, contributing with a significant amount to the high Activity Start Indicator of EBI Construction Activity Report Q1 2020. Overall, the first half of the year has not yet seen a major decline in the value of construction works that started in the construction industry, although it is true that it has now hit its lowest level since 2016.

In H1 2020 a major share (45%) of started construction works were concentrated in the Central Hungary region. This was mainly thanks to the higher investment numbers in Q1, so in Q2 the region had a similar share to the previous years. The rest of the country also had a very similar share of started new construction works to previous years.

EECFA countries in the European Commission’s 2020 Macro Forecast

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

EECFA 2020 Summer Construction Forecast – Pandemic edition

The 2020 Summer EECFA Construction Forecast Report was released on 29 June. It can be purchased, and a sample report can be viewed at www.eecfa.com. EECFA (Eastern European Construction Forecasting Association) conducts research on the construction markets of 8 Eastern-European countries.

Southeast Europe

Construction in the ‘small countries’ of EECFA (Bulgaria, Croatia, Romania Serbia, Slovenia) will be bruised by the pandemic effects this year, causing a drop in construction outputs. The two exceptions are Croatia and Bulgaria where civil engineering could compensate for the losses in building construction. Already in 2021, we are likely to see positive growth rates in all 5 countries.

Bulgaria. Although there was no ban on construction works during the two-month state of emergency in Bulgaria, construction output growth will be hampered by the COVID-19 crisis. The economic uncertainty and rising unemployment are expected to hold back real income growth, which will mainly affect the property market. The growth driver in 2021 is set to be the completion of many large-scale office buildings, while industrial and warehousing construction is also to contribute positively. Output in civil engineering will be driven by road and public utility constructions where EU funds play a major role. The energy sector will also have a net positive impact because of the ongoing works of the Bulgarian part of ‘Turkstream’ in 2020 and 2021. Thus, total construction output in Bulgaria is to remain almost unchanged in 2020 (+0.3%) while in 2021 it is set to grow by 9.2%.

Croatia. COVID-19 and the Zagreb earthquake have dramatically weakened the short-term outlook for most building construction in Croatia. Civil engineering, though, will remain relatively unscathed. For buildings, COVID-19 has greatly affected both supply and demand for construction services, while the Zagreb earthquake has primarily influenced demand, in some subsectors in less than straightforward ways. Civil engineering as a whole remains strong despite the pandemic and the earthquake, but demand will vary considerably from subsector to subsector. Croatia’s July 5 elections will significantly influence the country’s policy responses to the problems it faces, but no matter who wins, the consequences of the two crises will affect the country’s construction sector for years to come.

Romania. All segments of the Romanian construction market have been impacted, in one way or another, by the pandemic and the measures taken to mitigate it. Like the rest of the EU, Romania is passing through a recession, with GDP and public consumption dropping significantly in 2020. Recovery is expected for 2021, but Romania’s bounce-back might be slower than the EU-average, since there is a lack of infrastructure and public funding availability. New residential construction is predicted to perform worse than previously expected in both 2020 and 2021 due to lower demand. The non-residential subsector is also forecasted to have a rough couple of years, with companies rethinking their office needs and retail consumption trends shifting. In addition to the recession, low efficiency in EU funding absorption is also holding back civil engineering. Overall, we predict construction activity in Romania to suffer a 2.1% decline in 2020, but to recover slightly in 2021, as the economy stabilizes.

Serbia. The beginning of the year was exceptionally strong for all subsectors, announcing another year of steaming outputs, but it was broken by the pandemic state of emergency and movement restrictions in April 2020. The fact that Serbia had a lockdown in the midst of an economic and construction recovery will make it one of the more resilient economies as fast recovery is expected. On the other hand, this extraordinary event will definitely affect the overall result in 2020, with still uncertain severity. After restrictions were cancelled, rebound followed on both residential and commercial markets. Home transactions had a stellar recovery in May, and the retail segment also reports pre-crisis turnovers in June. The good news is that none of the planned projects was cancelled, while several large land transactions in May 2020 announce investments will go forward. What scenario will play out still depends on the epilogue of this crisis and the eventual follow-up events during the course of this year.    

Slovenia. Construction industry in 2020 and 2021 will be characterized by the short-term disruption resulting from COVID-19, and a more favourable long-term demand for construction services. The former itself, due to a 3-month long lockdown, could potentially decrease construction works by more than 10% in 2020, but anti-crisis measures, including a boost to civil-engineering construction, will be supportive. The forecasted decline in construction output in 2020 is thus 5,5%. Several big projects that started shortly before the onset of the pandemic have resumed after the lockdown such as the construction of the Second Railway Track to Port Koper and the Third Axis Road. These and a major raise in public housing (mostly in Ljubljana) should lead to a total construction output rise of 2,6% in 2021. In such a scenario, construction output will not decrease below EUR 3 billion in either 2020 or 2021, and might even act as a stabilizer for the country’s overall economic activity in contrast to the financial crisis of 2008 when a depression in construction activity represented a drag on economic development for almost a full decade.

East Europe

The ‘big countries’ of EECFA (Russia, Turkey, Ukraine) are also set to be hammered by the pandemic effects this year. Worsened by the underlying economic problems in these countries, they will likely register far bigger slumps in their construction output in 2020 than the ‘small countries’ of EECFA. But growth could return next year in Turkey and Ukraine, whereas Russia could experience a slight decline still.

Russia. The volume of construction market in 2019 is expected to have exhibited a minimal negative correction (-0.2%) due to the high base in 2018, and the decline in civil engineering caused by the completion of many big-league projects. 2020 is to see a considerable drop in construction (-7.4%) owing to a set of negative factors that the economy is battered by: falling oil prices, nosediving ruble exchange rates, as well as the subsequent COVID-19 pandemic and the long-lasting lockdown. All this has led to an economic crisis that will be felt throughout 2020-2021 and is to cause a recession in all segments of the construction market, except for strategically important ones such as infrastructure, healthcare and agriculture-related constructions. In 2021, due to the expected recovery trends in some segments of non-residential and civil engineering construction, the rate of decline will likely be noticeably slower, but the general negative dynamics will likely continue and the construction market is predicted to post a decrease by another 0.5%.

Turkey. The economy was in the process of recovering in early 2020 but had to confront with the COVID-19 problem from mid-March on, after the first positive case was diagnosed. To deal with it, the Government had to allocate big sums of money, which inevitably reduced funds to be used for projects. Precautionary measures for the pandemic and the falling exchange rate of the Turkish Lira against the Euro (by 13,65% between January-June 2020) caused declines in demand for many goods and services, including real estate. Incentives such as mortgage loans by state-owned banks for home buyers under market interest rates and at 90% loan-to-value ratio have become very effective: granted loans reached about 101,000 in the first four weeks of June. Building construction permits registered a historical peak in 2017, but massive drops in the next two years, which continues with a mild fall in Q1 2020. Completions, however, did not decrease in the same way as starts until Q1 2020, mainly because there are big backlogs of construction in every segment, except for wholesale and retail trade buildings. For this reason, building occupancy permits are set to continue to remain higher than construction permits during the following years. Nonetheless, we foresee further market contraction this year. Recovery could start in 2021.

Ukraine. Over the past four years, construction market of Ukraine was on a recovery path, but the pandemic and the consequent economic crisis dramatically worsened construction trends and expectations in the country. Current indicators of the volume of capital investments and a drop in construction volumes suggest a slump in the construction market. Under such conditions, state support and bank lending would remain a reliable means for the construction market, but developers stopped borrowing during the lockdown, and bankers predict a great decrease in business lending. Future construction trends will largely depend on the dynamics of the economic recovery. The government’s economic recovery program contains no targeted measures to support the construction industry or mortgage lending, leaving builders alone in the fight against the crisis. Residential market is expected to shrink most in 2020 and each sub-sector is foreseen to come back in 2021.

Source of data: EECFA Construction Forecast Report, 2020 Summer

Q1 2020 sees rush to complete ongoing projects in Romania

Written by Dr. Sebastian Sipos-Gug – Ebuild, EECFA Romania

The first quarter of the year 2020, mostly starting with mid-February, was marked by ominous economic forecasts. Thus, some decline in construction activity was to be expected, and indeed newly started construction projects dropped to just over EUR 1.3bln in Q1 2020. This amounts to a 14% decrease compared to the equivalent period of 2019, according to the latest edition of the EBI Construction Activity Report for Romania.

At the same time, the amount spent on construction increased by 25%. Coupled with the record amount of completed construction works (nearly double that of the first quarters in each of the previous 5 years), lends us to the conclusion that investment was increased in order to rush and complete the (at the time) ongoing projects, before the anticipated negative economic impact of Covid-19 took place.

Covid-19 changes in reporting frequency

In light of the Covid-19 pandemic and the accompanying economic impact, the data visualization for EBI Construction Activity Report is currently updated on a monthly basis, rather than quarterly.

Renovation activity increases in building construction

Building constructions started for the first quarter of 2020 dropped by 3% over the same period of 2019. However, the amount of new building construction for Q1 2020 is actually higher than in the first quarters of 2014-2018, and thus this small drop is more due to the good performance in 2019 than a clear sign of decline for 2020.

Looking at renovation figures, however, we can notice a somewhat new trend: that of increased renovation activity. While new building construction can, and in some cases was, pushed back due to uncertainty regarding the economic conditions, renovation works are less prone to this effect since they are more urgent in nature. Furthermore, as government measures started to be implemented in March, individuals and businesses alike needed to make adjustments to their living and working conditions: spaces were converted to quarantine centres, offices and industry alike had to adapt to new conditions and started to ensure layouts that allow more social distancing, hospital wings were relocated and so on.

Civil engineering output exceeds expectations, but low activity starts caution about future

The first quarter of 2020 saw an estimated expenditure of EUR 804mln on civil engineering projects, exceeding any single quarter since data aggregation started in 2014. The high level of output achieved came with the completion of many ongoing works and comes with a significant caveat: the quarter was also markedly worse than the previous year in terms of Activity Starts, with a 38% drop over Q1 2019. The most notable drops in new projects were in the segments of road and public utilities. Both reportedly had quite an increase in output over the same period, and thus the focus here seemed to be completion, rather than starting new projects.

Regional disparities in new construction activity

Despite the national-level decline in new activity, a large level of regional disparity can be noticed. The Center, South and West regions are showing an actual increase in construction starts compared to Q1 2019 in several segments, moving against the overall trend of the country. This could be an indicator of the higher level of resilience of local construction markets and a higher investor confidence in local economies. These regions might also be tardier in their response to the anticipated crisis, but it’s something to keep an eye on in the future and more data will show how resilient they are.  

EBI Construction Activity Report

The EBI Construction Activity Report is a quarterly publication that relies on the project information database of iBuild and is prepared by Buildecon and Eltinga. It comprises an analysis of projects based upon several object types: multi-unit residential construction, non-residential (further split into 9 segments) and civil engineering (split into 8 segments). The report offers information about the number and value of projects started or completed, and an estimate of the total amount spent on each segment in that quarter. If you would like to receive a data visualization for the EBI Construction Activity Report free of charge, please write to us at the ebi@ibuild.info e-mail address.

Serbia C-19 situation in construction (status on 05 May 2020)

Written by Dejan Krajinović, Beobuild Core D.O.O., EECFA Serbia

Physical restrictions

Since the introduction of the state of emergency and quarantine measures some seven weeks ago, there has been a visible negative effect in almost all spheres of the economy. Of course, some sectors have felt it more than others, particularly service sectors like transport and tourism suffered most of all. Some of the restrictions were partially relieved in late April and early May, but the state of emergency in Serbia was suspended on 6 May, so things should start returning to normalcy. It will take some time for the economy to recharge, but it is not expected for negative effects to extend beyond Q2 2020.

Construction works

In light of this, it could be said that the construction industry has been one of the less affected sectors, with only smaller decrease recorded in production volumes and logistical capacity. This was caused by the stringent movement restrictions during the quarantine, but luckily operations never halted and the expected damage should be minimal. Nevertheless, delays will be visible in the realization of some projects, as some construction sites relied on foreign workforce and encountered problems during this period.With the country borders closed, foreign workers were unable to travel and arrive on time, so this could be a factor affecting some of the deadlines.

We are planning to issue the new EECFA Serbia Construction Forecast Report on 29 June 2020. Sample report and order

Factors limiting the construction sector’s performance

The immediate effect of the restrictions was also felt in the residential subsector, where the quarantine interrupted the regular market flow, particularly on the demand side. Some price slashing was visible, but with strong market conditions this crisis won’t seriously affect its prospects. As a matter a fact, all internal driving forces are still booming, so this can only slightly dent its double-digit growth in 2020. In the retail segment almost all large pipeline projects are already underway, and with possible smaller delays in opening dates, outputs will likely remain strong this year. It seems tourism could suffer prolonged effects of COVID-19, since it’s expected for travel restrictions and special procedures to continue for few more weeks.

Booming construction outputs were also in large part supported by big infrastructure projects which will be one of the factors providing resilience. The largest infrastructure projects in most cases continued realization unabated, with special transport and separate accommodation for workers helping mitigate effects of the quarantine restrictions. So far, there are no requests by contractors for deadline extension on major projects, at least not the ones attributed to the COVID-19 situation. For projects being in realization for several years, one month of interruption is bearable and is often anticipated.

It is clear that the immediate effects on the construction industry and construction outputs in general will be limited. Maybe the future could hold more uncertainties since the affected service sector and parts of the real economy are yet to feel the full consequences of this disruption. The greatest dangers for Serbia are external factors, a possible drop in investments and capital flow, the extended crisis in major export markets or a bigger destabilization of the financial system. As it looks now, most European countries already started easing restrictions, and this could be the light at the end of tunnel. It is too early to celebrate, but it seems the worst is over, and a more elaborate assessment of the effects and consequences will be possible.           

Romania C-19 situation in construction (status on 30 April 2020)

Written by Dr. Sebastian Sipos-Gug – Ebuild, EECFA Romania

UPDATE ON 7 MAY 2020: from May 15 on a “state of alert” will take over the “state of emergency”. People will be allowed to move freely within localities without having to declare their destination, but only in groups no bigger than 3 people. Movement restrictions in towns under quarantine will remain in force.

Timeline

  • 26 February: the first confirmed case reported in Romania
  • 11 March: schools closed
  • 16 March: the Romanian president issued a state of emergency, granting the government enhanced emergency powers to cope with the pandemic. At the time Romania had 168 confirmed cases and no deaths.
  • 17 March: restaurants closed, and all public gatherings and events suspended
  • 21 March: shopping malls closed
  • 22 March: first death attributed to Covid-19 reported
  • On 24 March a state of lockdown was announced via military order and the population was restricted from moving freely outside of home, with several exceptions (work that cannot be done remotely, essential shopping, assisting the elderly, medical emergencies, walking pets, personal exercise in the proximity of the home, volunteering, agriculture). A proof for the valid reason for leaving home is required, with citizens asked to produce a personal statement prepared before leaving the home and/or to have a proof of employment. Elderly citizens (65+) were further restricted, being allowed to leave the home only for 2 hours per day (11:00-13:00). However, retailers were instructed to provide preferential service to them during this interval.
  • On 15th May, the State of Emergency is up for revision. However, even in the event of it being lifted, some restrictions are to remain in place, like the interdiction on festivals and large gatherings and the mandatory use of face masks in public spaces and on means of public transport.

Construction Works

  • While the lockdown significantly reduced the mobility of persons, it provided little restrictions in the range of work activities that could be done (dental work, non-emergency medical interventions, hospitality and in-house food service).
  • As of the writing of this article, there have only been a few major construction works delayed and, anecdotally, some projects are in fact moving faster than scheduled, such as bridge and road construction, taking advantage of reduced traffic. DIY works are also reported to be ongoing, with furloughed workers from other industries taking advantage of the time at home to engage in renovation works, with a noted increase in online sales of DIY retailers.

The new EECFA Romania Construction Forecast Report is planned to be issued on 29 June 2020. Sample report and order

Factors limiting the construction sector’s performance

The direct impact on the ongoing construction activity has been minimal since no restrictions were in place specifically targeting construction works. Recommendations regarding social distancing were given, but not mandated. Several indirect factors, however, were expected to limit the amount of construction activity:

  • Initial concerns over construction material availability have been raised. However, as of yet, no major shortages have been reported. Some manufacturers noticed a reduction in direct sales to individuals, however, B2B material sales have continued at comparable levels and online sales have increased.
  • Occasional worker shortages have been reported, as some workers have taken medical leave or used vacation days, especially in the early stages of the lockdown. Fortunately, no major shortages have been reported due to the infection.
  • At the same time, other companies have had to let employees go, with 37.750 work contracts in construction having been terminated from the start of the emergency period as of 29th April.
  • Lack of interest in investment is expected, especially in the hotel and restaurant segments, which will likely reduce demand in the current year. With slim changes of reopening for the summer season, tourism related construction is expected to be postponed.
  • Trends in office construction are also expected to change, with working from home on the rise and open office plans under scrutiny.
  • Lack of public funding could have a major negative impact on construction activity once the initial blow of the pandemic passes. Many county governments and city halls have used a large portion of their investment funds for measures aimed at reducing the spread of the virus, and thus there remains little for projects like infrastructure development or renovation. On national level, according to several governmental agencies, public deficit is set to reach 6.7-7.3% of GDP in 2020 and economic growth is to be stunted, with a decline of at least 1.9-4.7% of GDP.
  • Lack of private funding is also a major concern, with many companies losing significant resources and burning through their savings and credit lines.
  • At the same time, more than 1 million Romanians have had their work contracts suspended and 270 thousand lost their jobs since the state of emergency was instated (as of 29th April) and thus their spending power would have been significantly diminished.
  • Real estate transactions are showing signs of slowing down, with March 2020 seeing 4.6% fewer houses and 11.7% fewer apartments traded compared to the previous month. The market remained 8.5% more active than March 2019, however.

Anticovid measures in construction

There are no specific measures announced, as of the time of writing this article, aimed to supporting construction. However, there are some measures that could, indirectly, help:

  • The government is providing the resources to pay 75% of the initial wage for those with suspended contracts, helping public consumption remain afloat, with a positive impact on companies trying to retain qualified workers and maintain their cash-flow.
  • A RON 15bln program to support small and medium enterprises (“IMM Invest”) was launched on 28th April, providing state-backed loans for investment and working capital.
  • EUR 750mln have been allotted from EU funding for Romania for supporting small and medium enterprises, with a further EUR 300mln for assisting workers with suspended contracts.
  • The government’s economic recovery plan takes into account using infrastructure construction to boost the economy (which would increase the deficit even further). However, as of the writing of this article, no plan has been approved, and so the impact it would have cannot be assessed.
  • The government backing of mortgage loans for first time home owners is expected to continue into 2021, rebranded as “One family, one home” (Romanian: “O familie, o casa”), which should help counter some of the negative effects on the residential market. Its impact on the market diminished in 2019, with regular loans becoming almost as affordable, but it comprises a large portion of the segment nonetheless, since the programme covered 45% of all ongoing mortgage loans in March 2019.

Slovenia C-19 situation in construction (status on 26 April 2020)

Written by Dr. Ales Pustovrh – Bogatin, EECFA Slovenia

The COVID-19 pandemic has reached the Slovenian construction industry in a good shape. New construction contracts strengthened in H2 2019, resulting in some of the fastest growth of construction in early 2020 in the whole EU. The activity continued into March 2020 even though the lockdown measures were already implemented.

However, a decline is expected as halting construction works are affecting the entire sector:

  • There are some disruptions in the supply of materials as some manufacturers have stopped production and others have reduced production.
  • Construction work is being done less intensively mainly because of measures to protect workers.
  • Some foreign contractors have problems mainly with the logistics of their workers on projects in Slovenia.

Yet, the construction industry has been relatively less affected than some other industries (like tourism) as most large projects continue even during the lockdown measures. The concern is the absence of real estate contracts as the risk of making long-term investment decisions has also increased.

We are planning to issue the new EECFA Slovenia Construction Forecast Report on 29 June 2020. Sample report and order

Economic damage to construction segments will crucially depend on the duration of the crisis and the uncertainty it brings. According to some estimates, the short-term crisis is expected to result in a 5% drop in GDP. First indications that the return to normal operation of the Slovenian economy is near were the announcements that several lockdown measures were to be relaxed by the end of April 2020. Nevertheless, the actual fall of the economic activity will depend on the effectiveness of the state’s actions, where Slovenian politicians have promised one of the largest stimulus packages in the EU (estimated at more than 6% of its GDP) but they will have to be implemented in an effective way.