Due to its coastal geography, Croatia is exposed to the effects of climate change such as rises in sea level and serious wave and storm threats. In the near future, the country will need to take action which will involve increased civil engineering construction on the coast.
Written by Michael Glazer (SEE Regional Advisors) and Tatjana Halapija (Nada Projekt), EECFA’s Croatian members
Croatia’s building boom is continuing, but some of the engines currently driving it will likely run out of steam in a few years: Coastal hospitality-related construction will decline in importance as current renovation and greenfield projects complete and opportunities for new projects become more limited. Educational, health and other construction spending fueled by EU post-accession funds will decline as those funds dry up.
All of this is several years off, and inland hospitality construction and renewed office and residential building will take up some of the slack, so there’s no need to panic. But, it’s still worth asking: what will be the next big thing in the Croatian construction market?
Earlier this year, Croatia’s construction industry at last seemed on track for recovery after many dismal years of negative growth. 2015 saw a number of construction sectors moving into positive figures for the first time since 2009, but the recovery really took hold last year with all construction sectors likely to show positive growth once complete data for the year are available. Now, though, the Agrokor crisis has thrown this rosy picture into doubt.
Written by Michael Glazer, SEE Regional Advisors and Tatjana Halapija, Nada Projekt – EECFA Croatia
First, some background. The Agrokor Group is by far ex-Yugoslavia’s largest business conglomerate, with EUR6.4 billion in sales in 2015. Indeed, it is one of Central Europe’s largest companies (11th, according to Deloitte’s Central Europe’s Top 500 2016) and its second largest retailer (behind Poland’s Jeronimo Martins Polska, also according to Deloitte). Among other things, Agrokor owns the biggest retail grocery chains in Croatia, Slovenia, Serbia and Bosnia-Herzegovina (BiH), several large Croatian agricultural producers, important Croatian resort projects, significant travel agencies and major distribution companies for the wholesale and HoReCa sectors in Croatia and BiH.
Agrokor is now in serious trouble. It is having difficulty finding liquidity, a government administrator has been appointed for it by the Croatian government, the Slovenian and Serbian governments are considering similar measures and it is making only limited payments to its suppliers, on its taxes and to its lenders.