How Croatia’s government policies are impacting the country’s construction sector

Written by Michael Glazer (SEE Regional Advisors) and Tatjana Halapija (Nada Projekt), EECFA’s Croatian members

Croatia will at the turn of the year assume the rotating presidency of the Council of the European Union. So now is an appropriate time to assess how the Croatian government’s policies affect the country’s construction sector.

Source: Depositphotos

The government’s preparations for the presidency don’t inspire confidence that its influence is a positive one: the remodeling of the main building for the presidency won’t be completed until December 22, leaving no room for (further) delays. And there are concerns that the “finished” building won’t in fact provide satisfactory facilities. Not to mention the project’s being at least 50% over budget.

On the other hand, the current government has substantially increased Croatia’s absorption rate for EU funds. At 78% it is now slightly higher than the EU average of 77% and significantly greater than the country’s below-EU-average 2018 rate of 52%. This improved performance has enabled Croatia to invest massive amounts in infrastructure. And while, bureaucratic delays have meant that end users have received only 25% of the amounts they contracted for, much less than the 33% EU average, there is a real likelihood of even more rapid EU funds absorption in Croatia.

First, use-it-or-lose-it rules governing these moneys mean that contracts relying on them must be entered into before year-end 2020. Second, and crucially, presidential and parliamentary elections are coming up next year, by January 20 in the case of the president and by December 23 in the case of the parliament. Parliamentary elections, though, could be triggered far earlier if any of the minority members of the current, fragile coalition withdraws its support.

Continue reading How Croatia’s government policies are impacting the country’s construction sector

Global warming: near-future effects on the Croatian coastal infrastructure

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

Rovinj coastal city – Source: http://www.studio-pastello.com

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?

One likely candidate is Continue reading Global warming: near-future effects on the Croatian coastal infrastructure

EECFA 2017 Summer Construction Forecast and Revision

We have released our summer construction forecast on 16 June 2017 on Bulgaria, Croatia, Romania, Russia, Serbia, Slovenia, Turkey and Ukraine. This post intends to summarize the most important projections for these construction markets for the years 2017-2019. These are our main findings; for a deeper understanding, please consult our reports. You can contact us on eecfa.com.

Outlook for the EECFA regions

The highly optimistic outlook for South East Europe is maintained by EECFA. Leaving behind the transitory 2016, when the absorption of funds available in the new EU programming period (2014-2020) was still at a low level, the upcoming years are characterized by a bigger expansion of the construction market than that of GDP. Building construction is predicted to well outperform the total market, with a yearly average rate of 9% over the horizon. The small growth in the region’s total civil engineering market is attributed to the negative expectations in Romania.

Sideway moves, no further market expansion on the horizon are what we consider the most probable scenario for the 3 East European markets together. Turkey and Russia, being far the two biggest markets we cover in EECFA, is expected to show some similarities. In both countries our forecasts are moderately optimistic in the civil engineering market. While in the building construction market the outlook is clearly negative for Russia and neutral for Turkey. In Ukraine, the recovery experienced in 2016 is predicted to be sustained until 2019. Both building construction and civil engineering could expand further with a relatively good pace. Continue reading EECFA 2017 Summer Construction Forecast and Revision

Agrokor aggravation: Do the Agrokor Group’s tribulations threaten the Croatian construction sector?

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

agrokor_1
Illustration of Agrokor HQ (Croatia) photo by Zeljko Hladika, source: http://www.24sata.hr

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.

In theory, the consequences of an Agrokor Group collapse could be grave for all of the economies in which the Group operates, particularly Croatia, Continue reading Agrokor aggravation: Do the Agrokor Group’s tribulations threaten the Croatian construction sector?