EECFA 2025 Winter Construction Forecast

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EECFA released its 2025 Winter construction forecast on 12 December. Check out a sample report and place your order on eecfa.com. For discount, please contact us.

Southeast European construction markets

“Bulgaria’s total construction output is forecasted to increase by 3% on average for 2026-2027” – says Yasen Georgiev at Economic Policy Institute (EPI), EECFA’s Bulgarian research institute. He adds that this is to follow estimates for a similar performance of almost 3% in 2025. The sectoral background, however, shows, a nuanced picture – cooling of residential construction, positive news from non-residential and a robust performance of civil engineering. The latter will benefit from investments which will be backed by the absorption of EU funds through the Recovery and Resilience Plan (RRP) and classical operational programmes, both with implementation deadlines in 2026 and 2027. At the same time, Bulgaria’s economy is to expand by 2.4% on average in 2026-2027 – a period continuously shaped also by the Euro adoption on 1 January 2026.

Michael Glazer (SEE Regional Advisors) and Tatjana Halapija (Nada Projekt), EECFA’s Croatian members, think that declining dwelling sales in Croatia have, paradoxically, failed to stop the growth in the value of Croatian residential output, because increases in the price per square meter of those dwellings that do get sold have more than compensated for the lower number of square meters bought. “But how long this can continue is unclear” – they add. “The policies that the Croatian government is implementing in order to ease the country’s housing crisis are confusing the residential picture still more, since a number of those policies have contradictory effects on output. As to non-residential building construction, output growth during the period covered by the current forecast will depend greatly on the sector, with some likely to continue to benefit from catch-up growth and EU support for a bit longer and others moving toward a steady state or even a decline. In civil engineering, EU funds continue to play the dominant role in financing construction of all sorts. Sports facility construction is experiencing a boom, but given the speed with which such projects are completed, the effect on output will be relatively brief. Renewable energy construction should be growing rapidly, but regulators’ hostility toward the sector are holding it back.”

“Romania’s economy is entering a challenging period as the recently implemented measures to reduce the national account deficit begin to take effect” – reports Dr. Sebastian Sipos-Gug, EECFA’s Romanian researcher at Ebuild. “While most forecasters do not anticipate a recession, economic growth is expected to remain subdued over the next two years. Inflation is the highest in the EU, boosted in 2025 by increases in sales taxes. As a result, consumer prices are rising at a pace that is forecasted to outstrip wage growth, leading to a decline in real incomes in both 2025 and 2026. Government spending is also facing cuts, thus both private and public consumption are predicted to decline, with a chilling effect on most construction activity types. There is also the challenge of the massive level of public investment required by civil engineering projects that have started since 2023, which will be difficult to sustain under the austerity and the mounting pressure of losing even more EU funding. On the brighter side, both the economy at large and the labour market are expected to be quite resilient. By 2027, assuming the deficit reaches manageable levels, the effects of contractionary policies should fade out, inflation could ease, and interest rates could come down. This means that demand for construction would rebound and with it, construction activity.”

Dejan Krajinović, EECFA’s Serbian researcher (Beobuild) says that “Serbia’s overall construction output sank into a negative territory in 2025, primarily owing to the weaker performance in civil engineering. This year recorded growth in building construction, but the substantial consolidation in civil engineering dragged totals in red. The completion of major road, railway and energy projects contributed mostly, but delayed construction starts played a role as well. Residential construction is stable and is on historical levels, while non-residential construction is booming led by the hosting of the EXPO 2027 in Belgrade. Investments into commercial, hotel and office buildings are all spurred by the event, with the purposely built EXPO 2027 complex consisting of numerous venues being the single largest investment in non-residential. Improving financial conditions and sustained demand still support relatively high construction activity, but a lot of global political and economic uncertainties are dimming future prospects.”

Dr. Aleš Pustovrh at Bogatin, EECFA Slovenia, says that Slovenia’s construction sector is holding steady at EUR 6bn, though growth has cooled. Residential buildings remain the anchor, with output expected to show only a slight dip in 2025, helped by strong employment, rising wages and cheaper mortgages. Property transactions rebounded in early 2025, reversing last year’s slump, while prices continue to climb amid land shortages and slow permitting. Public housing programmes are ambitious, but private developers are concentrating on Ljubljana and coastal towns. Non-residential construction is mixed: offices are recovering slowly, retail stays subdued, but industrial and warehousing thrive on export demand and automation while health and education remain at very high levels. Civil engineering and public works lean on EU-backed projects and are anticipated to reach historically high levels by 2026. 

Eastern European construction markets

Andrey Vakulenko at Macon, EECFA’s Russian research institute notes that “the high key rate and the overall economic slowdown are constraining the Russian construction industry with negative trends expected for the current year and over the next two years. An easing of monetary policy, which has already begun, could help normalize the situation, but a positive effect is not expected until 2027. The main drag on construction output will likely be the residential subsector where high rates and revised government demand support principles are reducing activity among both buyers and developers. Negative trends will also likely persist in most non-residential segments due to declining growth rates of budget financing, a general decrease in business activity and a slowdown in consumption. The overall descending dynamics in the construction market may somewhat be mitigated by stable growth in civil engineering driven by export projects in energy and transport, but this growth is not predicted to be enough to keep the construction market in a positive zone”.

Prof. Ali Türel, EECFA’s Turkish researcher, reports that “the major effect of inflation-curb policies in Türkiye is the decline in disposable income and in the purchasing power of wage earners and pensioners. The moderate to lower-income population is unlikely to save enough equity for buying a home when rents have also become unaffordable for many. Ironically, housing sales have been increasing at a much higher rate than the growth of households. This can be attributed to the typical trend in Türkiye, where, during inflation, people expect a higher real return on their financial assets from real estate investments compared to alternative investment options. The reconstruction of earthquake-damaged buildings and infrastructure also contributed to the high rate of growth in building starts and completions from Q2 2025 onward, leading to the highest rates of change in the construction sector’s contribution to GDP compared to other sectors. Our latest forecast indicates that total construction output in Türkiye may reach 6.4 trillion TL in 2027 (EUR 180 billion), all at 2024 prices.”

According to Prof. Sergii Zapototskyi of Uvecon, EECFA Ukraine, despite the war and high risks, Ukraine’s construction industry remains one of the key drivers of economic recovery in 2025. The RDNA4 (the latest Rapid Damage and Needs Assessment Report) estimates Ukraine’s reconstruction needs for the next decade to be USD 486-524 billion, creating long-term demand for residential, non-residential and civil engineering construction works. Major challenges persist, including the uncertainty regarding the duration of the war, especially in frontline regions, labour shortages, bureaucratic barriers in the urban planning legislation, and logistical constraints due to the relocation of production facilities, and often, shortages in building materials. At the same time, the industry is demonstrating resilience: developers are diversifying supply chains, stabilizing procurement schedules, and increasing activity in the Central and Western regions. Demand for housing, intensive infrastructure restoration, and international investment from the EBRD, EIB, and other partners continue to support positive dynamics. The sector’s development prospects for 2026-2027 will largely depend on the security situation and the effectiveness of state recovery programs.

Housing needs of internally displaced persons in Ukraine

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Written by Sergii Zapototskyi – UVECON, EECFA Ukraine

The full-scale invasion of Russia caused a deep humanitarian crisis and exacerbated socio-economic disparities in Ukraine. One of the key challenges is to provide homes for internally displaced persons (IDPs). The mass movement of the population created a shortage of affordable and temporary housing as the infrastructure was not ready for such a load. The government is already working on a new housing policy, which might also help resolve the issue of housing for IDPs.

Source: https://www.ioc.gov.ua/analytics/dashboard-vpo

Statistics on internally displaced persons

As of 1 November, this year, 4,588,045 internally displaced persons were officially registered in Ukraine, including 838,436 children under the age of 18 [1]. Most IDPS are in Kharkiv region (508 thousand or 11%), followed by Dnipropetrovsk region (467 thousand or 10%), the city of Kyiv (430 thousand or 9.4%) and Kyiv region (232 thousand or 5%). [3]. IDPs in these regions total about 1.6 million people [1]. As per the result of the 16th round of the survey conducted by The International Organization for Migration (IOM, UN Migration), as of April 2024, about 2.7 million internally displaced people were from frontline areas.

Housing damages, needs and solutions

In total, more than 1.3 million Ukrainian households lost their homes because of the war, including not only IDPs, but also residents of settlements that suffered extensive destruction. The World Bank estimates total housing needs in Ukraine between 2025 and 2035 to be USD 86 billion, mostly to finance repair and reconstruction works of the housing stock (estimated at USD 75.5 billion including the cost of clearing rubble at USD 5.7 billion). USD 404.6 million should go to acute housing needs and funding has also been identified for organizational measures (USD 37.5 million) and regulatory and technical processes, including the development of strategies (USD 12.5 million) to coordinate and implement reconstruction programs [4].

Citizens have already submitted over 850,000 reports of housing damage through the Diia app (the national public-services portal) totalling over 60 million sqm of losses. For comparison, in the pre-war period, an average of 9-10 million sqm of homes were completed in Ukraine each year, demonstrating the scale of challenge and need for multi-level solutions in housing policy. Preferential lending programs are unable to solve this situation and cover the housing needs. The ‘jeOselia’ program provided loans worth over UAH 28 billion, but 52% of this went to military personnel, while IDPs received only 566 pieces of loans. In 2024, within the framework of this 3% mortgage program, only 500 families were provided with housing. The situation is even more critical in the rental market as the state program for subsidizing rental housing has shown low efficiency. The majority of IDPs (90-95%) rent homes unofficially, making them vulnerable to unreliable living conditions and unjustified rental charge increases or evictions.

Modular settlement, Borodianka. Photo: Sergii Zapototskyi

Modular settlements are a key temporary housing for IDPs, although living conditions here cannot be considered fully comfortable. Initially, they were meant to be short-term but gradually became long-term housing for many families due to their limited finances. Today, besides the psychological difficulties and discomfort of residents, operating such facilities is also a major challenge. The maintenance of modular settlements, including payment for utilities, repairs and security, falls entirely on local budgets, an additional financial burden for communities which often do not have enough resources to sustainably finance these.

Modular settlement, Bucha. Photo: Sergii Zapototskyi

Housing policy changes

As the problem of providing housing for IDPs is systemic in nature and cannot be solved solely through financial instruments, a comprehensive review of state housing policy has become necessary, particularly the development of an affordable rental housing segment, social programs, and long-term support mechanisms for both IDPs and vulnerable categories of the population in general.

The Ukrainian Parliament is already working on several key legislative initiatives. The central one is draft law No. 12377 ‘On the Basic Principles of Housing Policy’ to replace the current Housing Code from 1983 which does not contain basic concepts for modern housing policy such as social rental housing or housing stock of communal ownership. Draft law No. 4080 is also important on the inventory of the housing stock. In parallel with drafting these laws, necessary by-laws are being prepared to regulate the practical mechanisms for implementing housing policy (creation and maintenance of housing queues, criteria for selecting recipients of state support, and the procedure of providing various forms of housing assistance). In addition, the government’s plans until 2027 include allocating EUR 650 million to the eRecovery Program, EUR 450 million to support IDPs, military personnel and the families of the deceased, creating a social housing fund and introducing a unified state online system for the long-term strategy of social integration and support for vulnerable categories of the population. All this might help resolve housing for IDPs.

Sources:

  1. Internally Displaced Persons. State Enterprise “Information and Computing Center of the Ministry of Social Policy, Family and Unity of Ukraine”: https://www.ioc.gov.ua/analytics/dashboard-vpo
  2. Housing crisis in Ukraine: how to provide IDPs with housing in 2025? International Renaissance Foundation: https://www.irf.ua/zhytlova-kryza-v-ukrayini-yak-zabezpechyty-vpo-zhytlom-u-2025-roczi/
  3. Internal Displacement Report, IOM Ukraine: https://dtm.iom.int/sites/g/files/tmzbdl1461/files/reports/IOM_UKR_GPS_Internal%20Displacement%20Report_Round%2016_UA_June%202024.pdf
  4. Rapid Assessment of Damage and Recovery Needs RDNA4, World Bank Group: https://documents1.worldbank.org/curated/en/099052925103531065/pdf/P180174-93c8e8c1-83a2-487d-aaec-a8435f9db418.pdf  
  5. Cedos, Housing and Residential Conditions in Ukraine: Survey Results, 2024: https://cedos.org.ua/wp-content/uploads/zhytlo-ta-zhytlovi-umovy-ukrayin_ok_rezultaty-opytuvannya.pdf

More on the Ukrainian housing market and forecast for the segment, as well as the rest of the construction market will be in our Winter Forecast Report Ukraine to be out on 12 December, along with our other 7 country reports. To obtain it and check a sample report: https://eecfa.com/

EECFA 2025 Summer Construction Forecast

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EECFA released its 2025 Summer construction forecast on 23 June. See a sample report and place your order on eecfa.com. To get discounts, you may contact us.

Southeast European construction markets up to 2027

According to Yasen Georgiev at Economic Policy Institute (EPI), EECFA’s Bulgarian research institute, total construction output in Bulgaria is anticipated to grow by 3% on average for 2025-2027 with a stronger growth in the middle of the period when the absorption of operational programmes and the implementation of the Recovery and Resilience Plan are to gain momentum. According to the sectoral breakdown, residential construction is expected to be the subsector with the weakest performance, while non-residential construction and particularly civil engineering are predicted to see stronger growth figures. Against this backdrop, the country’s economy is set to register a slower-than-expected growth in 2025 and 2026. In parallel, it is awaited to benefit from the effects from the full Schengen area membership effective from the beginning of 2025 and from the euro adoption expected on 1 January 2026.

Michael Glazer (SEE Regional Advisors) and Tatjana Halapija (Nada Projekt), EECFA’s Croatian members think that Croatia’s construction as a whole continues vibrant due to the combination of continuing transitioning-economy catch-up growth and large inflows of EU money. Both are beginning to diminish, however, and that will affect all construction segments, some more strongly and more quickly than others. In building construction several sectors have seen the end or are close to seeing the end of catch-up growth. Others, particularly those that benefit most from EU finance, are still going strong. Civil engineering continues to profit greatly from EU funding, and because of the poor initial condition of Croatia’s infrastructure after independence, much catch-up construction remains to be done. Certain government policies will have a great influence on specific building and civil engineering sectors. Those policies include the housing policies embodied in Croatia’s new National Housing Policy Plan until 2030, the new tax on real estate and the country’s renewable energy permitting and electrical grid hook-up fee rules.

‘Romania’s macroeconomic outlook remains positive, but more reserved as the political instability and fiscal uncertainty have done little to improve growth opportunities’ – says Dr. Sebastian Sipos-Gug, EECFA’s Romanian researcher at Ebuild. At the same time, he adds, the country has the largest government deficit in the EU, which will dampen public investment capabilities. All these will make it harder to finance public works and could negatively impact civil engineering. This is doubly worrying as this subsector countered the decline in other construction segments in 2024, and thus the outlook for total construction remains negative in 2025 and 2026 in real terms. Not all is gloom and doom, however. As inflation and interest rates come down, and employment indicators remain strong, private consumption could boost demand for residential and non-residential construction.

‘In 2025 Serbia’s construction is making new gains in building construction, while civil engineering has entered a period of consolidation after the strong expansion during 2023 and 2024′ – believes Dejan Krajinović, EECFA’s Serbian researcher at Beobuild. Building construction is supported by both public and private investments, boosted by the hosting of the EXPO 2027 in Belgrade. Non-residential construction is the main beneficiary of this event, particularly commercial, office and hotel segments, while residential construction is also keeping historically high volumes. Some delays are seen in civil engineering, but the overall performance is still strong with a long list of planned projects in all major subsegments. Domestic demand is still relatively strong, but economic growth and the level of investments are being muffled this year by uncertainties in the global markets, particularly the weak EU economy, international trade issues and the ongoing wars in Ukraine and the Middle East.

‘Total construction output in Slovenia is expected to decrease from the historic high of EUR 5,5 billion reached in 2023. In both 2024 and 2025, it could contract but remain above EUR 5 billion annually’ – as per the opinion of Dr. Aleš Pustovrh at Bogatin, EECFA’s Slovenian member institute. He predicts the sector to return to growth in 2026 and 2027, mostly on the back of a healthy growth in residential construction buoyed by decreasing mortgage rates. On the other hand, civil engineering is prognosticated to shrink significantly in 2024 and 2025 due to some large projects nearing completion, like the new railroad connecting Port Koper. Both non-residential and civil engineering depend to a large degree on public financing that was widely available in the post-Covid period but will become much less available in 2025-2027. Especially if the overall economic activity continues to slow down. This deceleration and more foreign labourers have also caused lower construction cost growth, but other challenges persist such as the additional bureaucratic burdens (changed permitting process, increase in tax, ongoing discussion on changes to short-term rental legislation, among others) and many external risks in the global economic and political environment. 

Eastern European construction markets up to 2027

‘In the forecast horizon, the construction sector of Russia will be under pressure from a range of macroeconomic factors, the main one being the high key rate, which will negatively affect the pace and volume of construction projects’ – according to Andrey Vakulenko at MACON, EECFA’s Russian research institute. The tight monetary policy and the reduced availability of mortgages will likely slow down housing construction, on the one hand. On the other, the high cost of project financing, the general cooling of the economy as well as reduced consumption and business activity will likely shrink the volume of investment in non-residential construction. However, these trends can partly be offset by high volumes of government financing of priority infrastructure and energy projects, which can support civil engineering and ensure near-zero growth in total construction market in 2025-2027.

Prof. Ali Türel, EECFA’s Turkish researcher says that Türkiye has been trying to control high inflation by raising the base rate and managing exchange rate increases through market instruments by the Central Bank and maintaining wage growth at zero or negative rates. This created financing difficulties for industries and businesses, reduced demand for basic consumer goods, and led to affordability problems for mortgage credits. Big declines in building starts and completions in Q1 2025 may also be related to these measures. Yet, the Central Bank’s inflation target for 2025 remains high at 24%. Positive real changes in housing prices relative to building construction costs encourage house building, while their negative real change compared to inflation may be the leading factor in the increase of home sales through equity financing when mortgage credits are not affordable for most households. Rebuilding the quake-damaged 870 thousand units requires about EUR 100 billion and these expenditures have been the primary factor of the large national deficits in recent years.

‘This year, in spite of the continuing war and the economic instability in the country, Ukraine’s construction industry shows signs of recovery and growth on the back of successful programs financing both the construction of new facilities and the reconstruction and restoration of infrastructure in eastern and southern regions’ – according to Prof. Sergii Zapototskyi at Uvecon, EECFA Ukraine. The World Bank estimates that reconstruction would require USD 486 billion. On the negative side for the sector are bureaucratic barriers in the urban planning legislation, shortage of workers caused by mobilization, shortage and high cost of building materials, and logistical difficulties. On the positive side for the sector is demand for housing and the need to restore damaged infrastructure. The near-term future of the industry depends on the level of security, the effectiveness of restoration programs and the volume of international investments.

EECFA 2024 Winter Construction Forecast

Posted on by efalucskai

EECFA released its 2024 Winter construction forecast on 16 December. Check out a sample report and purchase any of the 8 reports or the package of 8 reports at eecfa.com. For discounts, contact us.

Southeast European construction markets

Total construction output in Bulgaria is forecasted to grow by an average of 3.3% in 2024-2026, which is slightly above real GDP growth projections for the same period. The subsector breakdown shows that residential construction is expected to lose momentum, but this is likely to be compensated by a more dynamic performance of non-residential construction and civil engineering. In parallel, general economic activity in Bulgaria in the forecast period is to be influenced by the effects from the full membership in the Schengen area from 2025 onward and the prospects for the country to introduce the euro on 1 January 2026.

Croatian building construction presents a varied picture across subsectors, with anticipated output growth ranging from significantly positive to somewhat negative. Civil engineering is more uniformly positive, but certain sectors show the effects of the completion and commencement of large projects. Both building and civil engineering output growth will be strongly influenced by new government laws and regulations, the consequences of which, while likely to be large, are difficult to predict for both the short and medium terms. These include the new National Housing Policy Plan until 2030, the new tax on real estate and measures to balance the playing field between different types of tourism accommodations.

Despite the rise in investment, Romania will likely continue to see a stifled growth in construction in real terms due to costs remaining high. Stubborn inflation and the slightly disappointing macroeconomic performance combined with increased wages and still high interest rates create a less appealing environment for investors in building construction. On the bright side, high income and importsare indicative of strong demand for consumption and could translate to demand for construction. While infrastructure did well, the current political turmoil and uncertainty could hobble performance going forwards. Even assuming deficit remains high but stable, as the EC expects, it would continue to raise public debt and make financing further projects more politically difficult. As some downside factors could improve by then, construction growth is forecasted to return to positive in 2026.

Serbia’s construction is likely to have closed another strong year led by civil engineering, but non-residential also entered a new growth cycle with positive outlook boosted by public investments and the hosting of the EXPO 2027 in Belgrade. The construction of commercial, office and hotel buildings are all set to grow in the coming period, followed by education and health. Residential construction is already on historically high levels with a relatively stable performance. In civil engineering, road and railway construction continues unabated, breaking new record volumes on the way, but other segments also have an impressive project pipeline. The economy is set to expand by 4% in 2024 and 2025 on the back of strong consumption and high investment, so construction outputs may sustain formidable levels up to 2026.

Slovenia’s construction sector is expected to maintain post-pandemic levels with annual output consistently exceeding EUR 5 billion up to 2026 against the EUR 3 billion pre-pandemic. Public financing has been a key driver with national budget expenditure up from EUR 10 billion in 2019 to over EUR 15 billion in 2024, though there will be spending limits in 2025-2026. Civil engineering in the forecast period will be supported by major infrastructure projects. Residential construction is set to drop slightly first in 2024 before rebounding by 2026 driven by lower mortgage rates. Non-residential construction is forecast to grow steadily but remain dependant on the availability of public financing. Other challenges remain such as labour shortages, permit backlogs and high costs, but construction cost growth is set to stabilize at under 3% annually.

Eastern European construction markets

In 2024, the Russian construction industry fared better than previously expected driven by the high pace of project implementation and the massive budget support in civil engineering and non-residential construction. It could even offset the negative impacts of the decline in housing construction caused by the end of the mass preferential mortgage program. However, this positive momentum is expected to gradually fade owing to the tight monetary policy of the Central Bank and several other internal and external factors that are slowing down the economy in general and the construction industry in particular. In 2025-2026, the record budget expenditures planned within the framework of new national projects and other measures of state financing will likely maintain construction market volumes in Russia in the positive territory, but with minimal growth.

In Türkiye, increased interest rates and the Central Bank’s policy to reduce the depreciation of the national currency to curb inflation has not yet produced the intended outcomes. And high interest rates are blamed for shrinking industrial output and decelerated trade growth. The interest rate and the Central Bank’s policies had two major effects on the construction sector: big negative real rates of change in construction costs and housing prices. Housing sales are growing as real prices drop and rely on equity financing since mortgage loans have become unaffordable at high interest rates. Building permits in most segments decreased in Q3 2024, while completions had a positive trend. The government’s legal obligation to rebuild the earthquake-damaged 350 thousand buildings with 870 thousand independent units has been the main factor in huge budget deficits that impede the Government from providing sufficient funds for civil engineering projects.

As a consequence of the war ongoing for over 1000 days, Ukraine’s construction market is facing economic difficulties, limited resources, huge losses in buildings, hike in building material prices, lack of skilled workers and limited access to financing, topped with the unpredictability of government decisions and the instability of property rights. The destroyed homes of more than 1.5 million families create a huge demand. Non-residential construction also focuses on the restoration of destroyed buildings and the construction of new ones in safer central and western regions. Civil engineering is also boosted by the renovation of bridges, roads, railways, pipelines, communication and power lines. The ‘Unified portfolio of public investment projects’ recently approved by the government includes 750 big reconstruction projects on roughly UAH 2.36 trillion, while the state budget also has UAH 256.1 billion for public projects in 2025. First, the EUR 50 billion under the EU’s Ukraine Facility are to be used. Financing is also planned through international financial organizations and foreign governments. The priority is energy, transport, utility and public buildings such as schools.

Post-war reconstruction of Ukraine: plans and prospects

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Written by Sergii Zapototskyi – UVECON, EECFA Ukraine

Ukraine has been defending its independence with weapons in hand for over 1000 days. Through blood and suffering, it has preserved its name on the world map and is gaining more and more respect as a nation of unconquered, proud and free people. And despite the war, life goes on and there is a constant need for reconstruction and restoration.

Destroyed kindergarten in Kyiv. Photo by Sergii Zapototskyi

In September 2024, the Deputy Prime Minister for Reconstruction and the Head of the State Reconstruction Agency were appointed, and in parallel, the government approved the ‘Unified portfolio of public investment projects’ which is a list of large-scale post-war reconstruction projects (750 currently) with an estimated UAH 2.36 trillion. At the same time, total funds of the State Budget of Ukraine for public projects in 2025 is UAH 256.1 billion where UAH 186.9 billion are receipts from international financial organizations and donors (loans, grants, state guarantees).

The priority is to increase the stability and the restoration of the energy grid of Ukraine and UAH 51.3 billion are earmarked for such public projects in 2025. Energy facilities in the portfolio include the construction of the 3rd and 4th units of Khmelnytskyi nuclear power plant on UAH 134 billion to provide an additional 2 GW of energy capacity. (The loss of energy capacity in Ukraine in 2024 alone has been about 9 GW). Another priority is the rehabilitation of hydroelectric power plants on over UAH 15.3 billion and a pilot project for hydrogen energy on UAH 413 million.

Transport projects are estimated at UAH 248 billion and the main ones include the completion of a concrete bypass road around Zhytomyr and the development of border road infrastructure on the Ukrainian-Polish border (Krakovets, Rava-Ruska, Yavoriv in Lviv region). The segment will also see metro development in Kharkiv and Dnipro, the development of seaports in Kherson and Odessa, as well as the restoration of civil aviation in the future like the reconstruction of airports in Boryspil (UAH 32.8 billion), Lviv (UAH 1.2 billion) and Chernivtsi (UAH 1 billion).

Besides these, they plan to build the National War Memorial Cemetery (UAH 7.4 billion), to provide housing for war veterans (almost UAH 20 billion) and for internally displaced persons (UAH 1.7 billion), and to centrally repair war-damaged housing (UAH 35 billion) and Okhmatdyt hospital (UAH 14.8 billion). There are also many renovation projects for schools, gymnasiums, and several projects to build new or renovate prisons and detention centers (e.g. a new pre-trial detention center in Kyiv region on around UAH 1.6 billion and the repair of a camp for prisoners of war in Lviv region on UAH 112 million). UAH 6.7 billion have been allocated for adaptation to climate change as well, and a dozen of waste processing plants will be built across Ukraine on over UAH 124 billion, including water purification systems.

On the one hand, this is post-war reconstruction through repairs and construction that have been postponed for years. On the other, this is a historic chance for the economy to start hundreds of new projects that will create a new quality of life for citizens through new jobs, better wages and social protection, greater accessibility to housing, education, and medical services.

Expenditures from the state budget for priority reconstruction works will be UAH 141.1 billion. Another UAH 115 billion is provided in state guarantees, which will allow borrowing money for construction from foreign partners. First, they plan to use funds under the Ukraine Facility program for EUR 50 billion financed by the EU. Financing is also planned through international financial organizations and foreign governments where the latter take patronage over the revival of Ukrainian regions. Local financing and others (public-private partnerships and various grants) are also included. Large-scale reconstruction could bring big foreign investors to Ukraine, mainly construction companies with their technologies and expertise.

Forecast for the whole construction sector of Ukraine will be available on 16 December in the new EECFA Forecast Report Ukraine that can be purchased on the EECFA website.

EECFA 2024 Summer Construction Forecast

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EECFA, our construction forecasting cooperation in Eastern European countries, released its 2024 Summer construction forecast on 25 June. View a sample report and buy any of the 8 reports or the package at eecfa.com. For discounts, contact us.

The expansion phase was over in 2023 in SEE as a whole, but the current contraction is not foreseen to last as long as the latest one after 2008. By 2026 this region could return to around its previous peak. The EE region as a whole is expanding, and we are still optimistic all the way on the horizon.

A closer look reveals that only Romania, the largest market, is behind the overall setback of the SEE region. Here the previous peak is not expected to be reached soon. Elsewhere in the region further expansion is our current view. Serbia’s trajectory is a bit different, but the market could stay at a high level despite the drop next year. Recovery in Türkiye is forecast to be so strong that it could well counterbalance a shrinking Russia. Ukraine is coming back from a very low level, hence the relatively good growth figures.

Southeast European construction outlook up to 2026

Bulgaria’s economy is set to grow by almost 2% in 2024 and 3% in 2025, while the country is heading to a eurozone membership, most likely in 2026. In parallel, construction output is forecasted to decline year on year in 2024-2026 due to expected drop in residential construction and heterogeneous, yet positive performance of the non-residential one. Civil engineering bears a potential for an accelerated growth if EU funds’ absorption bounces back and public investments in infrastructure speed up. 

Croatian civil engineering is moving into even higher gear now, especially with the recent update to the TEN-T Network, which greatly benefited Croatia. Accordingly, output in most civil engineering sectors will rise. Building output presents a more mixed picture, with some sectors having reached or come close to peak output, while others are thriving.

The outlook for Romania’s construction sector remains negative this year. Inflation is shrinking, but more slowly than desired, keeping interest rates relatively high for longer and impacting financing costs. Also, the switch between the EU programming periods, combined with still high construction costs and an election year, will mean lower efficiency in starting and implementing long-term projects. Because the macroeconomic outlook is good and if the other issues are resolved, by 2026 construction might start growing again.

Serbia is expecting to see more stabilization in the construction sector this year, with both building construction and civil engineering estimated to stay in the black. The latter is very close to recording a consecutive double-digit growth in 2024. The economy is picking up, interest rates are slowly receding, so there is confidence that construction can sustain high output levels. Demand stays relatively strong, while stable prices are to keep investments high this year.

Slovenian construction is forecasted to surpass its record 2023 output this year and continue its growth trajectory into 2025, exceeding EUR 6 billion for the first time. Major civil engineering projects will likely drive this growth, bolstered by flood reconstruction efforts. Public investment in housing is planned but is contingent on future public funding availability that will also impact non-residential construction. The industry faces workforce shortages, but increased immigration and declining construction costs are expected to mitigate these issues, supporting further growth.

Eastern European construction markets of EECFA up to 2026

In Russia, the increase in people’s solvency, the restoration of business activity and dynamic economic development ensured growth in construction output last year, but recovery trends are slowing down owing to both external restrictions and internal negative factors. The residential and civil engineering construction subsectors remain key for the industry, but their dynamics depend on the level of government participation and the volume of allocated budget funds. Even though negative trend is forecasted for the residential subsector in the coming years, the drop in overall construction output in 2024-2026 is not predicted to be significant as the market will be supported by the construction of export infrastructure projects.

Türkiye’s economy has been greatly affected by last year’s earthquakes that caused great human and material casualties, requiring the rebuilding of destroyed homes, workplaces, and infrastructure. The government’s costly obligations coincide with a return to conventional economic policies that require austerity. Massive reconstruction spendings have caused huge budget deficits and civil engineering is worst affected by this. Increased interest rates have created affordability problems for bank loans, mostly mortgage ones, so home purchases rely mostly on equity financing and serve as a hedge against inflation. Home permits in Q1 2024 rose due to permits issued in earthquake-hit regions. This, and the private sector’s returning appetite in most commercial building segments, aligns with the expected high GDP growth.

Ukraine is making great progress in overcoming the consequences of the full-scale invasion, showing economic growth. The issue of reconstruction is acute, though. The main problems in the market are rising prices and shortage of building materials, growing costs of logistics and a shortage of skilled labour. In energy the immediate restoration of energy generation facilities is required to provide stable electricity. State and international programs for the restoration and construction of housing will likely contribute to the revival of the construction market. In the coming years, the future of the market, more than ever, will depend on three things: results on the battlefield; Ukraine’s subjectivity in the international arena; and the ability to protect its interests against Russian diplomacy. 

EECFA 2023 Winter Construction Forecast

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EECFA, which celebrates its 10th anniversary this year, released its 2023 winter construction forecast on 15 December 2023. The new reports can be purchased, and a sample report can be viewed at eecfa.com.

No clear direction in the Southeast European region of EECFA; 2024 is foreseen to experience a decline, but a comeback is our current scenario for 2025. Expansion is projected to prevail all the way until the end of the forecast horizon in the East European region.

Romania is expected to contribute most negatively to the shrinkage of the SEE region in 2024. The rest of our countries is forecast to perform better. Bulgaria, Croatia and Serbia could end up at higher level in 2025 than what was experienced in 2023. Upswing in Türkiye is envisaged to pull the EE region up and we still believe that shrinkage in Russia is about to come. Not a particularly strong, but recovery is projected in Ukraine.

Construction outlook up to 2025 in Southeast Europe

Bulgaria’s economy is expected to lose momentum in 2023 that will translate to a lower, yet positive growth in 2024. Against this backdrop, construction output is to follow this trend with heterogeneous performance on segment level. While in the forecast period till 2025 civil engineering and non-residential construction will likely contribute with positive growth figures, after several strong years, residential construction is predicted to witness a new normal with negligible annual growth rates from 2024 onwards if any.

Croatia’s construction output will continue to grow, rapidly in 2023 and less robustly in 2024 and 2025. Civil Engineering construction is poised to become the brightest star in the country’s construction firmament with Buildings showing considerable sector to sector variation, but overall not performing as strongly as in the past.

Romania’s construction is expected to shrink in 2023 in real terms. Economic growth is slowing down under sticky inflation and high financing costs. Further slowdown might come in 2024 as multiple elections, political pressure to lower budget deficit, high social spending and the transition to the new EU programming period would make it challenging to focus on public projects. The outlook doesn’t look better on the private investment side with tight labour market and sluggish consumption growth expected for 2024. By 2025, return to growth is postulated as most of these obstacles may dissipate. 

During 2023, Serbia has been performing better than initially expected with the economy picking up in the second half of the year and construction outputs registering another record high. While the construction of buildings is consolidating in a moderate manner, civil engineering surged with a double-digit growth rate. The easing of inflationary pressures is also helping market stabilization, while high interest rates remain a major impediment for growth in short-term. 

Slovenia’s construction industry in late 2023 faces economic challenges exacerbated by unprecedented floods in August, causing EUR 10 billion in damages. Despite workforce shortages leading to increased construction costs and inflation, the sector is expected to see a significant rise in output with civil engineering projects, including flood repairs and infrastructure initiatives, driving growth. However, concerns arise over the potential deceleration in growth in 2024 and 2025, mostly in residential and non-residential construction even as reconstruction efforts in civil engineering gain traction.

What to expect in the Eastern European construction markets of EECFA

In Russia, stable government support, a relatively favourable macroeconomic environment, and the general resilience of the industry to external challenges ensured positive dynamics in construction in 2023, making the forecast more optimistic for this year. The industry’s development strategy prioritizes housing construction as well as transport- and energy-related projects. The positive momentum is not predicted to last long, though, and in the 2024-2025 horizon we might observe contraction in construction market volume, mainly due to the expected decline in the residential market which might outweigh the positive dynamics in other subsectors.

Türkiye’s economy has been impacted by two developments with one being the reconstruction of collapsed buildings and infrastructure in recent earthquakes where most tax revenues went, causing large monthly budget deficits. The other one is increasing interest rates. Although the Central Bank increased the base rate from an 8.5 base point level to 40 in six successive months, it couldn’t curb inflation and there are exchange rate rises along with inflation. The construction sector grew at higher rates than the GDP as the national average on the back of building construction in earthquake-hit provinces. Growing interest rates reversed most of the problems caused by the low-interest rate policy, but it also led to an increase in construction cost and hit the affordability of purchasing homes.

Ukraine’s construction market has been struck by the ongoing war. According to official data alone, almost a million flats, tens of thousands of non-residential buildings, thousands of kilometres of roads, railways, bridges and other infrastructural facilities were either destroyed or damaged. The construction industry partially lost its raw material base and production as most metallurgical enterprises located in the south and east were destroyed or occupied. The main construction segments that can predictably develop even during the war are the restoration of damaged housing and social infrastructure, civil engineering, construction and modernization of industrial production.

What happens to Ukraine’s construction market amid the war?

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Written by Sergii Zapototskyi – UVECON, EECFA Ukraine

The full-scale war in Ukraine has been going on for more than a year and a half. People are dying, cities are being shelled. The real consequences are now difficult to calculate, but even available estimates are huge. And the construction market is facing rising construction costs, shortages of building material and skilled labour.

Izyum, Kharkiv region, City Hospital. Photo by Sergii Zapototskyi

Documented damages

As of 1 September 2023, direct documented damage to Ukraine’s infrastructure due to the full-scale Russian invasion amounted to around USD 151.2 billion (at replacement cost):

  • Housing losses remain the largest share of total direct damage (USD 55.9bln). In total, about 167,200 homes were destroyed or damaged (of which 147,800 private houses, 19,100 apartment buildings) mostly in Donetsk, Kyiv, Lugansk, Kharkov, Nikolaev, Chernigov, Kherson and Zaporozhye regions.
  • Infrastructure and industry, as well as enterprises came second and third in terms of losses (USD 36.6bln and USD 11.4bln, respectively). 18 airports and civilian airfields, at least 344 bridges and bridge crossings, and more than 25,000 km of state and local highways and public roads have been damaged so far. And at least 426 large and medium-sized private and state-owned production facilities were damaged or destroyed because of the war.
  • Education buildings are also hard hit (USD 10.1bln in damage). The number of damaged and destroyed educational facilities already exceeds 3,500 (more than 1,700 secondary, more than 1,000 preschool, and 586 higher education institutions). Most destroyed and damaged buildings are in Donetsk, Kharkov, Kherson, Nikolaev, Zaporozhye and Kyiv regions.
  • Losses also continue to grow in healthcare buildings (USD 2.9bln). In total, 1,223 medical institutions were destroyed or damaged, including 384 hospitals and 352 outpatient clinics.
Izyum, Kharkiv region, multi-storey buildings. Photo by Sergii Zapototskyi

The construction market during the war

With the full-scale invasion, almost all developers suspended work and many of them in the residential and commercial sectors have not yet resumed it yet or some work at a minimum level. According to market analysts, out of 90% of sites that were supposed to resume construction after 24 February 2022, only 50% have done so now. At the same time, barely a third of companies have acceptable construction rates. Construction cost has already grown by 37% since the beginning of 2023, pushing up the average cost per square meter. The main factors behind the decline in construction were physical danger, a major increase in exchange rates and high inflation, which massively reduced the purchasing power of Ukrainians. Serious obstacles also arose with logistics, and due to the suspension of construction work and interruptions in supply, demand for metal structures collapsed. And after Russia destroyed two metallurgical giants, Azovstal and MMKI (Mariupol Metallurgical Plant), the market faced a shortage of rolled metal products. The destruction of some industrial enterprises added to the problems, and at end 2022, the market of metal structures in Ukraine sank by 55%-65%.

Kupyansk, Kharkiv region, factory. Photo by Sergii Zapototskyi

In October-December 2022, construction companies faced a new challenge: they had to adapt to power outage schedules or buy powerful generators to ensure uninterrupted construction. Most developers found it more practical to suspend construction, which also contributed to declining construction volumes. The most serious problem though in many regions were the massive rocket and artillery attacks. Thus, in 2022 the total area of completed housing was 7.1 million sqm, 38% less than in 2021 (11.4 million sqm). Last year, as per Ukrsat, the lion’s share of housing was put into operation in the western regions, mainly due to security (residents wanted to escape from the war).

Now the construction market is facing the following challenges:

  • There is a decrease in demand and an increase in construction costs.
  • Many building material plants were located in the east and many have been destroyed or suspended, thus domestic building material production has slumped.
  • Main logistic corridors and ports are still not working and alternative routes are not yet able to fully cover the deficit. The expected return of the excise tax on fuel will lead to an even greater increase in logistic costs.
  • Ukraine is facing a shortage of skilled labour. There are fewer quality graduates from Ukrainian universities, and students are leaving. Students studying abroad are in no hurry to return to a country at war, so they obtain jobs there. Also, many skilled specialists joined the armed forces, or retrained due to the drop in construction volumes, or went abroad.

When the war ends, a lot will have to be built and restored. Ukraine has lost more than 170 million sqm of housing and it is clear that the market will not be able to cope with such recovery volumes on its own. The level of demand will largely depend on the course of the war (damage caused), the expected liberation of Ukrainian territories, the volume and consistency of international financial assistance (mainly to cover the huge expenses of the state budget), and the general economic situation. And once the urban planning reform (to make the market transparent) is completed, business processes in development, primarily in financing housing construction, may significantly change. Also, in the primary housing market there may be a shift to quality, safety, energy efficiency and functionality. When the war ends, residential complexes and serviced apartments in the live-work-play format may become priority (built according to new ecological, energy-saving, and functional standards with a high degree of safety).

To obtain the EECFA Forecast Report Ukraine and to view a sample report, please visit eecfa.com. EECFA (Eastern European Construction Forecasting Association) conducts research on the construction markets of 8 Eastern-European countries, including Ukraine.

EECFA 2023 Summer Construction Forecast

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In Southeast Europe the forecast is mixed across the board. For this year, EECFA expects expansion in all but one of its five small countries’ construction markets (Romania). For next year, Serbia will also likely join by turning into negative territory, while in 2025 Croatia is forecasted to be the only country to register a drop, albeit a modest one.

In the Eastern European region of EECFA, construction forecast up to 2025 is positive for Türkiye and Ukraine, while in Russia it seems gloomy all the way. In Türkiye, the reconstruction after the February quakes is the key driver, while in Ukraine, a lot will depend on how fast and how soon the reconstruction of the damaged stock can be carried out. EECFA has attempted to make its first forecast for Ukrainian construction since the war began.

Construction up to 2025 in Southeast Europe

In Bulgaria, the new coalition government can mitigate the expected economic slowdown in 2023 by speeding the absorption of EU programs and the implementation of Bulgaria’s Recovery and Resilience Plan. Total construction output is estimated to achieve real growth in 2023. Factors in favor of this forecast are the strong tailwind in residential construction, a slight growth in non-residential and expectation for an improved performance in civil engineering.

Neither inflation nor population decline could stop Croatian construction output’s growth in 2022, and 2023 looks likely to follow suit. Figures for some Buildings sectors, e.g., Retail and wholesale and Residential, contain surprises. Performance of certain Civil engineering sectors was unexpectedly strong due to events that may be one-off or instead portend a trend.

High construction cost is a major factor behind the expected downturn in Romanian construction this year and next, but the market should recover by 2025. EU funding from the 2013-2020 programs has a spending deadline of 31 December 2023, and with the new 2021-2027 programs still in early phases of implementation, a gap is expected in output while the switch takes place. Also, 2024 is a quadruple election year for Romania (local, parliamentary, presidential, European parliament), bringing new challenges for construction as power transition can bring new priorities and strategies.  

Serbia is feeling the consequences of the economic slowdown in the European Union, but so far it seems it will avoid recession in the short term. Construction outputs are also showing a mixed picture with building construction suffering contraction in volumes, while civil engineering will likely break new record highs in 2023. And even though there is a lot of uncertainty, the high level of investments is still maintaining positive economic growth and strong employment figures. 

The Slovenian construction industry continues to exhibit resilience amidst a thriving economy. While challenges such as inflation and higher interest rates pose hurdles for the residential construction subsector, non-residential and civil engineering are benefiting from increased public investment. By capitalizing on these opportunities, the industry is well-positioned to contribute to the country’s ongoing economic growth and development.

Outlook in the Eastern European construction markets of EECFA

Last year the Russian economy showed relatively high resilience to the negative effects of sanctions. One growth point was construction that showed much better-than-expected dynamics. Russia’s ‘Turn to the East’ notion in the new external political-economic conditions requires intensive construction of infrastructure objects, which fueled growth in construction in 2022. Going forward, the market will likely show decline driven by negative trends in residential and some downturn in civil engineering on the back of a high base in 2022.

After the elections held on 14 and 28 May 2023 in Türkiye, the value of Lira has been falling, creating financing difficulties for contracted construction projects using imported materials. In Q1, the economy accelerated annually owing to strong domestic demand and low interest rates, while construction continued to regain senses. The two earthquakes in February in 11 provinces caused massive human casualties and damages to over 300 000 buildings and infrastructural facilities. As the Government must restore buildings and infrastructure, growth in construction will speed up in the years to come.

If hostilities end in 2023 and Ukraine’s territorial integrity is preserved, post-war reconstruction will cost several hundreds of billions of US dollars according to various recovery plans. About 3 million Ukrainians saw their homes destroyed and about a third of the infrastructure is damaged. The war caused widespread damage to the construction sector and full recovery is only expected after the war ends. Now there is a partial construction of destroyed or damaged residential, non-residential, and critical infrastructure facilities in relatively safe areas with the help of compensation programs at state and local levels and mortgage programs. A key challenge though is the acute shortage of building materials (glass, cement, asbestos, and gypsum, among others). Resumption in construction will improve the country’s post-war economy, provide jobs, increase the production of materials and open new enterprises.

The EECFA 2023 Summer Construction Forecast Reports up to 2025 have been released and can be purchased on eecfa.com where a sample report can also be viewed.