2013-10-24 16:06:19 - Recently published research from Business Monitor International, "Croatia Consumer Electronics Report Q4 2013", is now available at Fast Market Research
Continued weaknesses in the residential and non-residential construction sub-sector and lack of funding in the infrastructure sub-sector will be the two most potent dampeners for growth in the overall construction sector. Growing at an average annual rate of only 1.6% year-on-year (y-o-y) between 2013 and 2022, we see little room for a complete recovery in the construction sector's real value anytime during the 10-year forecast period. The infrastructure segment will, however, outperform the residential and nonresidential construction sub-segment, thanks to continued investments in transport and utilities.
Although Q113 readings for real GDP surprised to the upside, declining 'only' 0.9% y-o-y, from -2.7% y-oy in Q412, there is little optimism in the construction sector. The Central Statistics Office (KSH) estimates that only
2,680 new houses were completed during H113 - almost 40% lower compared with the same period in 2012. Meanwhile, the number of new construction permits issued in the first half of 2013 fell by 43% to just 567. Given that the residential and non-residential construction sub-segment itself accounts for close to 55% of the total construction industry value (as of 2012), it will be hard for the construction sector to recover as long as demand in the residential and non-residential construction sub-segment remains weak. We are forecasting a 2.7% y-o-y contraction in the sub-segment to result in an overall 0.5% y-o-y real contraction in the construction industry value during 2013.
Full Report Details at
- www.fastmr.com/prod/694819_croatia_consumer_electronics_report_q ..
Meanwhile, we forecast government expenditure to remain static during the course of 2013, as the Hungarian government attempts to keep its budget deficit under the 3.0% of GDP level that has enabled the country to leave the EDP. The infrastructure segment will accordingly grow by only a cautious 2.1% y-o-y during 2013.
Key areas of growth in the sector:
* Commitment To Transport Spending: The biggest growth opportunity for the country's transport infrastructure is the support given by the EU to drive the modernisation of Hungary's road and rail links and improve freight transport throughout the country. We expect growth in the railways sub-sector to outpace growth in the overall transport segment as the government remains committed to bring investments into the segment. In May 2013, GYOR-Sopron-Ebenfurth Railway (GySEV) invited bids for a contract to electrify the Szombathely-Hegyeshalom line in Western Hungary. The project involves electrification of the 87km section from Porpac to Mosonszolnok, reconstruction of platforms at 15 stations and the deployment of electric turnout heater units. It is scheduled to be concluded by end-2015.
* Pipeline Projects: A number of international natural gas pipelines passing through the country have the potential to bring substantial investment in the Hungarian energy and utilities segment. In addition to various pipeline projects with its neighbours, Hungary has joined four other countries in the region to sign an intergovernmental agreement that apportions gas flowing through the planned Nabucco pipeline from Central Asia. Although the project has been impeded by significant delays and cost concerns, Bulgarian Prime Minister Boyko Borisov revealed that he expects the construction of the Nabucco pipeline to begin in January 2013 and be operational by 2017. Backing our long-held view about more investment in the sector was news in August 2013 that Hungary has invited bids from both foreign and domestic companies for seven new exploration licenses: four for hydrocarbons and three for geothermal exploration. The move is part of the government's overall attempt to ease dependence on imports. Hungary imports most of its supplies from Russia.
* A rare piece of good news for the residential and non-residential sub-segment came from the business sector, where demand for new housing has shown a marked increase in cities such as Budapest. A close to 62% y-o-y increase in demand for new dwelling by businesses in Budapest, to 597, resulted in their share growing to 68% of the new dwellings. This increase in business demand helped non-residential building permits fall by only 12% y-o-y during the first half of 2013.
As a result of these uncertainties and poor growth prospects, Hungary ranks 11th in BMI's Infrastructure Risk/Reward Ratings for Central and Eastern Europe, with a below-average score of 54.6 points this quarter. There could be more downside to this score if our outlook for the construction sector changes for the worse.
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