Construction growth slows in Western Balkans
By Steve Skinner24 February 2009
Construction growth in the Western Balkans is expected to slow to +6% in 2009, down from +12% last year according to the latest report from PMR market research.
In 2009 the construction market in the region, which is made up of Serbia, Croatia and Bosnia and Herzegovina, is expected to be worth almost € 7 billion, up +6% on 2008. Development forecasts for the period 2009 to 2011 are more subdued however, with PMR warning that more robust growth will not be possible before 2011, and this growth will primarily be fuelled by an increase in Croatian construction as a result of EU membership and the subsequent access to EU funds.
The Bosnian War of 1992 to 1995 and the bombing of Yugoslavia during the Kosovo War in 1999 had a major impact on the construction industry in the region. Worst hit was Bosnia and Herzegovina, which lost most of its essential transport system as well as suffering massive damage to residential areas. Even today, the number of homes in the country falls short of those found in 1991.
Bosnia is still to repair its transport infrastructure while damaged bridges and institutional buildings continue to be a part of the Serbian landscape.
Thanks to economic growth and infrastructure investment supported by EU funding, coupled with less war damage in the first place, Croatia has succeeded in repairing and developing its infrastructure network.
"Widespread uncertainty and strong risk aversion on the international market will have an adverse effect on international capital flows for the region," said Bartlomiej Sosna of PMR. "In the past, most economic growth in the western Balkans was financed by importing external funds in the form of foreign direct investment or public and private debt. Risk re-pricing on the international financial markets following the global financial crisis has increased the cost of such external financing," said Mr Sosna. "In addition, reduced demand from the EU will adversely affect exports from the region."
PMR forecasts that residential and non-residential growth in the Western Balkans will decline in the coming years, while civil engineering will continue to grow. Both Serbia and Bosnia and Herzegovina have ambitious plans to complete the construction of major transport corridors, especially their sections of the Trans-European Network Corridor-X, a 2360 km long link between Thessalonica in Greece and Salzburg in Austria.
The Serbian government plans to invest € 4 billion in infrastructure by 2011 with € 1,6 billion earmarked for the road network along Corridor-X and € 1,1 billion set aside for the rail network."The Western Balkans market is at a very early stage of development," said Mr Sosna. "With many huge road and rail development projects planned and part of the funding coming from the European Bank for Reconstruction and development, PMR expects the global financial crisis will have a limited impact on the region's construction market."