The decline in construction production is mainly due to reduced demand caused by expensive loans and high inflation. Analysts polled by ČTK agree. According to them, the situation is not expected to improve in the future, as evidenced, for example, by a 10 percent decrease in the number of building permits issued this year. According to data released today by the Czech Statistical Office (ČSÚ), construction output in the Czech Republic fell again in April, accelerating to 6.4 percent year-on-year from a revised 2.6 percent in March. Production in both civil and civil engineering construction was lower. On a month-on-month basis, construction output was down 3.4 percent.
“The construction sector is suffering from the effects of high inflation and recession, which has forced the private and public sectors to reassess and postpone their investment plans,” said Petr Dufek, chief economist at Bank Creditas. However, he adds that the downturn in the construction sector may also have positive consequences, as it may contribute to the normalisation of prices of building materials. Vít Endler, CEO of investment company Fingood, also agrees with Dufek. “One of the biggest hindrances to the Czech construction industry is the difficulty in accessing financing. In addition to high interest rates and longer processes, banks have recently tightened the rules for lending significantly. And it is in the area of financing real estate projects that this changed approach is most visible,” Endler added.
The acceleration of the decline in construction work also worries Jiří Nouza, president of the Union of Construction Entrepreneurs. “In addition, both civil and civil engineering construction have contributed to the decline. This is the third month in decline, which is already a warning that we must take seriously,” Nouza said.
Martin Gürtler, an economist at Komerční banka, said the situation cannot be expected to improve in the coming months. “At an identical pace to the overall construction output, both civil and civil engineering production declined month-on-month in April. Thus, not only is residential construction not doing well, but civil engineering construction, largely financed by the state budget, is also struggling,” Gürtler said. He said investment in transport infrastructure will also be slowed by the government’s austerity measures.
Source: CTK
