BMI View: The Czech construction industry is expected to expand 5.9 5 % y-o-y in 2016, slightly higher than the already strong figures of 2015. This year, the main growth drivers are expected to be t he non-residential and transport sectors. T he latter through the rail and roads sub-sectors, are still enjoying EU-driven investment , set to remain strong to 2020 . The r esidential and non-residential building industry will be another bright spot in 2016 and 2017 as robust Czech economy and high household disposable income increase housing demand.
Latest Updates And Structural Trends
Following the years of recession after the 2008 financial crisis, the Czech construction sector was and still is a symbol of the country's economic resurgence. In 2015, the sector grew 5.26% y-o-y and it is expected to expand by a slightly higher growth rate in 2016. Increasing household consumption, a low inflation and unemployment rate in combination with higher investment activity facilitated growth in the economy, which started in 2013. However, legislative changes need to be implemented in the construction sector to create a more functional industry and there are current positive indications in that direction.
This quarter, we have revised up our 2019 and 2020 construction industry growth outlook to reflect an anticipated uptick in EU fund absorption towards the tail-end of the 2014-2020 funding period.
The Czech residential and non-residential building industry will grow moderately over our 10-year forecast period to 2025. This is mainly due to the increasing growth in the non-residential sector at least until 2020 as a result of the growing office space and industrial real estate. Furthermore, due to domestic economic growth and increased housing demand, residential prices increased in 2015 and in Q116, which is another indication of growth in the residential industry. The residential and non-residential sector is expected to grow 3.4% yearly between 2016 and 2025, on average.
Despite the decreasing EU funding, the transport infrastructure industry is expected to grow substantially by 8.2%% y-o-y in 2017, mainly due to the roads and railways sectors, which are still its main growth drivers, expanding by 7.6% and 9.4% y-o-y respectively the same year.
This quarter, we revised our 2019 and 2020 transport sector growth forecasts upwards to reflect an anticipated uptick in EU fund absorption towards the tail-end of the 2014-2020 funding period. However, our forecasts account for the eventual slowing of this funding and sector growth will taper off past 2020 as projects wind up and as the 2014-2020 funding period comes to an end. Yet as the macroeconomic picture continues to brighten, the government should find themselves better placed to increase investment. Transport sector growth in 2017 of 8.2% y-o-y is forecast to take the industry value to USD3.9bn in 2017.
The weak performance of the Power Plant and Transmission Grid infrastructure sub-sector will drag down on the overall energy and utilities infrastructure sector growth, at a 3.4% yearly growth rate over the forecast period due to a lack of large-scale projects in the pipeline.
|e/f = BMI estimate/forecast. Source: Czech Statistical Office, BMI|
|Construction industry value, CZKbn||233.82||249.01||263.72||281.26||305.16||335.07||356.73||379.55||401.03||425.57||450.34|
|Construction Industry Value, Real Growth, % y-o-y||5.26||5.95||4.41||4.15||5.50||6.80||3.47||3.40||2.66||3.12||2.82|
|Construction Industry Value, % of GDP||5.2||5.4||5.5||5.6||5.8||6.0||6.1||6.2||6.2||6.2||6.3|
The Czech Republic's Infrastructure RRI score increased slightly to 68.0 out of 100, compared to the previous quarter and is still high compared to the regional average of 61.6.
The improving economic environment, strengthening public sector investment outlook and increased EU funding lead to the country's Industry Rewards score of 60.0 out of 100, which is high by regional standards (50.3).
Compared to the regional average of 67.1, the country scores well in terms of Industry Risks (75.0 out of 100), owing to its competitive and open infrastructure market as well as the presence of the world's largest construction companies.
|Risk/Reward Index||Rewards||Industry Rewards||Country Rewards||Risks||Industry Risks||Country Risks|
The Czech Republic Infrastructure Report features BMI Research's market assessment and forecasts covering public procurement and spending on all major infrastructure and construction projects, including transportation and logistics by land, sea and air; power plants and utilities, and commercial construction and property development. The report analyses the impact of regulatory changes and the macroeconomic outlook and features competitive intelligence on contractors and suppliers.
BMI's Czech Republic Infrastructure Report provides industry professionals and strategists, sector analysts, investors, trade associations and regulatory bodies with independent forecasts and competitive intelligence on the Czech infrastructure and construction industry.
- Benchmark BMI's independent infrastructure industry forecasts for Czech Republic to test other views - a key input for successful budgetary and planning in the Czech infrastructure market.
- Target business opportunities and risks in the Czech infrastructure sector through our reviews of latest industry trends, regulatory changes and major deals, projects and investments in Czech Republic.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. SWOTs, KPIs and latest activity).
BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis covering infrastructure and construction, regulatory changes, major investments and projects and significant national and multinational company developments. These are broken down into construction (social, commercial and residential), transport (roads, railways, ports, airports, etc), and energy & utilities (powerplants, pipelines and so on).
Industry SWOT Analysis
Analysis of the major strengths, weaknesses, opportunities and threats within the infrastructure and construction sectors and within the broader political, economic and business environment.
BMI Industry Forecasts
Historic data series (up to 2012) and forecasts to end-2024 for all key industry indicators, supported by explicit assumptions, plus analysis of key developments in the market and risks to the main forecasts. Indicators include:
Construction: Industry value (USDbn); contribution to GDP (%); total capital investment (USDbn); real growth (%).
Construction industry real growth forecasts (%) and industry value (USDbn) forecasts for industry sectors are split into Residential and Non-residential and Infrastructure sectors. Where the data is available for particular countries the infrastructure is further broken down into indicators for the transport subsectors of roads, railways, airports and ports and the energy and utilities sub-sectors of power plants and transmission grids, oil & gas pipelines and water infrastructure. This dataset is unique to the market.
The reports also include analysis of latest projects across the infrastructure sectors (transport, utilities, commercial construction).
BMI’s Infrastructure Risk Reward Index
BMI’s Risk Reward Index provides investors (construction companies, suppliers and partners) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points. These provide indices of highest to lowest appeal to investors, with each position explained.
An assessment of the competitive landscape and key challenges to entering the market. Details of the largest companies active in the sector across the sub-segments of the industry, including the key financial figures from some of the largest players in the sector.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape to generate company SWOT analyses. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
The Infrastructure reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.