Czech construction improved its position by four places among EU countries

Prague – Czech construction experienced a year-on-year decline of 4.6 percent in the first half of this year, ranking 13th among the 26 countries of the European Union, with data from Italy and Cyprus not available. Compared to the previous year, the Czech Republic improved by four places, holding the same position as at the end of the first quarter. This is based on data from the European statistical office Eurostat. In EU countries, construction declined by an average of 8.5 percent in the first half of the year.

"The construction sector in Europe found itself in a specific situation in the first half of the year due to measures against the spread of the coronavirus. Thus, the performance of the sector was often not determined by demand, but by various restrictions from the supply side, particularly the availability of labor and materials due to limited border permeability," analyst Pavel Sobíšek from UniCredit Bank told ČTK.

The drop in Czech construction was not dramatic according to him, yet it is still somewhat disappointing. "There were hopes that the sector would at least partially replace industry in its role as the engine of the economy, but that has not been confirmed. The year-on-year decline in construction performance also deepened during the first half of the year," Sobíšek added.

The largest increase in construction output in the first half of the year was in Romania, with an increase of nearly one-fifth. Malta followed with a growth of 5.6 percent, and Latvia where construction increased by 5.5 percent. Nineteen countries were above the EU average. With a decline of 4.6 percent, the Czech Republic was above the average. Seventeen countries of the union recorded a decline. In France, construction decreased year-on-year by 23.5 percent, in the UK by 19.5 percent, and in Greece by 17.8 percent.

"Construction is among the cyclical sectors that encounter serious problems during a crisis. This is evident in most countries of the European Union. In the Czech Republic, ongoing projects are still being completed, and engineering constructions are also being realized. Therefore, Czech construction has suffered a milder decline than the EU average in the first half of this year," stated Štěpán Křeček, an analyst at BH Securities.

According to Trinity Bank analyst Lukáš Kovanda, significantly increased amounts of public money should now flow into infrastructure projects in the Czech Republic to counter-cyclically mitigate the decline of the entire economy and, consequently, the decline of the construction sector itself. "However, there is not a sufficient number of projects prepared that could be started quickly. A fundamental obstacle in this regard is the inflexible construction law, which does not allow for a sufficiently rapid response in the field of construction to the situation that has arisen. The overall consequence is then significant damage to the entire economy," Kovanda added.

Year-on-year change in construction performance in EU countries in the 1st half of 2020:

Country	Index (in percent)
Romania	19.7
Malta	5.6
Latvia	5.5
Germany	3.6
Finland	3.2
Croatia	3.1
Denmark	1.3
Netherlands	0.4
Poland	0.1
Sweden	-0.4
Lithuania	-0.8
Estonia	-1.8
Czech Republic	-4.6
Portugal	-4.9
Austria	-4.9
Slovenia	-5.6
Slovakia	-7.2
Hungary	-7.4
Bulgaria	-7.4
Belgium	-11.1
Ireland	-12.8
Luxembourg	-13.3
Spain	-16.0
Greece	-17.8
United Kingdom	-19.5
France	-23.5
EU Average	-8.5

Source: Eurostat