Croatian construction to return to growth in 2013

The construction industry in Croatia is poised to see a return to slow growth in 2013 after reaching the bottom last year and continuing to stagnate in 2012, according to economic research company Buildecon.

It said the market in Croatia had registered a massive slump from the sky-high levels of 2008, with practically all subsectors shrinking to half of their peak size, while total construction output in 2011 dropped by a further 6%.

However, the return to growth will be both slow and patchy, with big differences likely to occur in subsectors. Buildecon forecast that the biggest winner could be the Croatian civil engineering sector, but growth here will rely on the success of a new 2012 to 2015 investment plan announced by the government.

The plan includes a pledge to invest €1.23 billion in 2012, of which €280 million has been earmarked for investments in electricity production, €120 million for water-based civil engineering, €500 million for road building projects and €130 million for rail projects.

Buildecon said, "If they are successfully implemented, growth could even exceed our modestly optimistic current forecasts. Further, Croatia still needs to construct several high-volume civil engineering projects - its highway construction programme has not been completed yet. The Croatian government will need to find alternative sources of financing for civil engineering (as well as other) works."

EU membership

Croatia is set to become the 28^th member state of the EU on 1 July, 2013. Buildecon said the country's non-residential sector would be the main beneficiary of the change, thanks to the access to EU cohesion funds that it would bring.

Nevertheless, Buildecon pointed out that Croatia's public investment in non-residential projects is likely to be "massively reduced" as a result of the austerity measures in 2012 and in 2013.

A downbeat outlook was also presented for Croatia's residential construction market, where there is a huge stock of unsold apartments due to the excessive construction activity during the boom years.

Buildecon said that, although this stock is slowly selling, it does not expect a major hike in residential construction by 2014.

"As far as the number of issued building permits for homes is concerned, those issued in 2011 continued to drop and has sunk below 10,000 for the first time in years. This will prevent the robust return to growth in the segment in the near future, even if the sources of financing are assured," it said.