Construction industry in the Czech Republic is finally expected to grow this year

Construction companies expect that the market in the Czech Republic will eventually grow this year. While after the second quarter they estimated that it would fall by 1.9 percent year-on-year, after the third quarter, despite rising inflation and the ongoing war in Ukraine, they think that it will grow by 1.9 percent by the end of the year.

However, the outlook for next year remains pessimistic and a year-on-year decline of 3.7 percent is expected. This follows from a study by the analytical company CEEC Research.

Out of the total number of 116 surveyed directors of construction companies, 62 percent expect market growth by the end of the year, thanks to market inertia. According to the study, small and medium-sized construction companies should grow by 2.2 percent by the end of the year, and large construction companies estimate a lower year-on-year increase of 1.5 percent. The capacities of construction companies are on average utilized at 97 percent, the highest since 2018. According to builders, their sales could increase by 2.7 percent by the end of 2022.

"In general, construction production is still growing, although not at a dizzying pace. However, we can see from the statistical data that after the steep rise at the beginning of the year, the trend is rather the opposite. I assume that growth will slow down or rather stop," said Tomáš Koranda, chairman of the board of the construction company Hochtief CZ.

The reasons for the market decline in 2023 will mainly be inflation, labor shortages or cooling demand. Construction companies expect the market to decline by 3.4 percent, and engineering firms predict a 4.7 percent decline. "Directors are mainly concerned about the growing pressures to limit state investments, which may lead to a reduction in the budget for construction contracts," said Michal Vacek, executive director of CEEC Research.

As for sales, the study expects them to fall by 2.9 percent in the construction industry next year. Bigger companies estimate a bigger drop in sales, up to 4.7 percent, while small ones expect a 1.5 percent drop. Radim Čáp, managing director of Swietelsky stavební, expects stagnation due to growing uncertainty in the outlook for interest rates and the instability of price inputs for virtually all building materials.

The trend in the number of contracted contracts in advance has hardly changed since last year, on average, construction companies have contracted contracts for nine months. Ten percent of orders announced in the first half of this year were cancelled, CEEC Research added.

Source: CEEC Research and CTK