Czech construction is driven by European funds, analysts say

Prague - Czech construction is driven upwards mainly by European funds, from which money flows into transportation infrastructure. Conversely, land construction, primarily the construction of buildings, is lagging behind. This follows from the reactions of analysts contacted by ČTK regarding the data published today by the Czech Statistical Office. According to the current data from the CSO, construction production in July increased year-on-year by 12.3%, with a seasonally adjusted growth of 14%.
    Lukáš Kovanda, the chief economist of the Roklen financial group, reminds us that construction was the last of the key economic sectors to begin recovering after the crisis. "Now it is growing all the faster, with the pace of growth accelerating. Since March of this year, there have been four consecutive months of double-digit growth. Something similar last occurred at the beginning of 2007, before the outbreak of the global financial crisis. The truth, however, is that construction has room to grow, as the base is still relatively low - more than 17% below the level of 2008, the last year before the crisis," says Kovanda.
    Other economists and analysts share a similar view. "Construction cannot avoid growth. In a period when there is construction almost everywhere, especially in the area of transport construction, a decline is unrealistic. The enormous investments currently flowing from European funds into transportation construction are revitalizing the construction sector again," stated Home Credit analyst Michal Kozub, emphasizing that the growth of construction is fueled by the utilization of European funds.
    According to ČSOB economist Petr Dufek, civil engineering is also the engine of growth. "It is civil engineering, and thus primarily the construction and repair of infrastructure, that is behind the boom of the entire sector. After all, when traveling across the Czech Republic, one cannot help but notice the record level of construction activity in the transportation sector. From the perspective of contract development, it is evident that we are now reaching a peak in infrastructure work, primarily driven by the effort to access funds from the EU," noted Dufek.
    However, Petr Kymlička from the BDO consultancy network asserts that the excess demand in the civil engineering sector is beginning to hit a shortage of capacity, especially in railway construction. "Conversely, it is clear that there is a cooling off in land construction, which is experiencing a significant decline, particularly in residential construction. A relatively significant decrease in the number of building permits issued does not contribute to positive outlooks for land construction," Kymlička pointed out.
    The director of the analytical company CEEC Research, Jiří Vacek, also warns of the same problem. "As many as two out of three companies (67%) confirm that they have problems finding new workers in the market. Half of the companies (54%) also face challenges ensuring subcontracting for already closed contracts," emphasized Vacek, noting that the growth of Czech construction is also supported by a large volume of public contracts that companies secured last year and are currently working on.
    The president of the Association of Entrepreneurs in Construction in the Czech Republic, Václav Matyáš, also warns of a possible slowdown in the sector. "Overall satisfaction is marred by the outlook for future development, which is signaled by the continuously decreasing value of issued building permits and a lack of newly announced public contracts. The Association of Entrepreneurs in Construction in the Czech Republic has long pointed out the insufficient and slow preparation of investment projects, which not only hinders construction but can also result in the inability to access European funds," Matyáš pointed out, adding that the only exception are railway infrastructure projects.