Serbian construction growth continues

06 March 2012

Serbia has been trying to restore its construction industry following the economic crisis in 2008, and the initiatives used have meant that the country has seen growth since 2010.

In its latest report on the Serbian market, economic research company Buildecon said that many mechanisms had been applied in the country's attempts to recover from the crisis.

Major civil engineering projects were launched with the help of the IMF (International Monetary Fund), the EBRD (European Bank for Reconstruction & Development) and the EIB (European Investment Bank). Low-cost residential dwellings were built, and housing loans for new dwellings were subsidised.

The adoption of regulations on the conversion of land usage rights into ownership rights was another initiative. An official register of property ownership was completed, while tax was increased on temporarily closed construction plots and on all buildings less than 80% finished.

Buildecon said that these initiatives, along with others to attract additional FDI (foreign direct investment) and to boost exports, have led to economic growth since 2010.

It said that in 2009, the impact of the global crisis was visible in residential construction, with its decline of 4.9%.

"Owing to the low supply of housing units in the previous year and rising demand, we expect in 2011 an upswing in the sector of new constructions," said Buildecon. "In 2011, the residential construction sector is estimated to have grown by 7.9%, reaching a value of €467 million (at 2011 prices).

"Between 2012 and 2014, the sector is predicted to expand with an average yearly growth rate of 3%, reaching in 2014 a value of works of almost €500 million (on comparable prices). In this period, a more aggressive growth rate is to be seen in the addition and reconstruction subsector, as it will increase yearly by 3.6% on average."

Buildecon said that for the non-residential segment, the years 2009 and 2010 were the periods of deep market contraction as it shrank by 16.2% and by 18.7%.

It estimated that in 2011, the market had shown positive signals with a 3% upsurge, reaching a value of €460 million (at 2011 prices). The forecast period is thought to be characterised by an average growth rate of roughly 5%.

New constructions will be more active than additions and reconstructions owing to planned commercial buildings, especially in the region of Belgrade and other big cities.

Civil engineering in 2010 - mostly as a result of national construction projects financed by the IMF and the EBRD - rose by 1.6%. Because of Serbia's goal of meeting EU infrastructure standards and of helping its construction industry as much as possible during the crisis period, the civil engineering market is expected to have soared by 19% in 2011 (reaching the value of €1,09 billion) and by another 19% in 2012.

Buildecon said the period between 2012 and 2014 would be "quite peculiar, bringing high positive growth rates in 2012 and high negative ones in 2013".

It said the positive growth of 19% in 2012 would be a result of many projects, including part of Corridor X ­- one of the trans-European corridors, running from Austria to Greece - and works related to the railway.

The following negative growth in 2013, on the other hand, is related to the completion of these projects and to the fact that there is no secured financing for planned projects as yet. In 2014, the fluctuation is expected to calm down with a predicted 3.4% growth rate.

Buildecon added that the value of works in the construction market (expressed as construction output at constant price) dropped between 2008 and 2010, with a yearly average rate of 7.1%.

As a result of secure financing for planned projects, a major increase is forecast by Buildecon in 2011 (reaching about €2 billion) and in 2012. It said, "In 2013, the trend is predicted to turn slightly negative, as financing from this year on is highly uncertain. However, we predict that a modest surge in the economic growth will lead to a renewed construction output growth by 2014, rising by 3.4% against the previous year."

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