Czech Republic Infrastructure Report Q4 2011

BMI View: Despite a general halt in construction activity in the Czech Republic across 2010, the power sector posted astronomical growth, propelling the infrastructure sector into real growth territory. The outlook for 2011 and 2012 is much more muted, with the country’s power sector suffering due to changes in policy and the transport sector tormented by an absence of funding. Combined, these problems will pull down construction sector real growth as a whole, with the sector making an unconvincing return to growth of just 1.4% year-on-year (y-o-y). Browse All: Manufacturing and Construction research Reports The Czech construction sector fell prey to regional trends in 2010, with its construction industry grinding to a halt as a result of a continued absence of private sector funding - especially in the residential and non-residential building sector. Furthermore, public sector austerity also limited infrastructure investment. Despite these problems, while the construction sector as a whole contracted by 7%, the release of new data, which breaks down subsector performance over the year, illustrates that the infrastructure sector - despite the absence of government funding - outperformed considerably. This is primarily due to the construction of power plants, and BMI believes that solar projects are the likely cause. Despite this surprise figure, our outlook for the construction sector as a whole remains in place, and we expect only a muted recovery in industry value in 2011. We now expect 1.4% real growth for the year with further downside from residential and non-residential building.rnThe residential sector was in relative freefall in 2010, with new construction depleted severely. Due to base effects we are forecasting a return to growth in the industry in 2011; however, there are numerous downside risks, with a continued lull in demand stalling new-build projects. Our negative outlook hinges on a number of factors:rnDespite momentum building for a return to growth towards the end of 2010, weak Q111 results illustrated that the recovery is still fragile, leading us to make a slight downgrade to our outlook for 2011.rnResidential and non-residential building should return to positive territory in 2011 following three consecutive years of contraction. Indeed, given the steep 24% decline in real growth witnessed in 2010 (precipitated by a sharp drop in housing completions) we expect base effects to account for much of the anticipated rebound in 2011. However, we believe the forecasted double-digit growth belies the weak sentiment that continues to pervade the sector. Related Reports: Kuwait Infrastructure Report Q4 2011 China Infrastructure Report Q4 2011