The Polish construction industry is due to shrink by 3-5% in 2020 compared to the year previous, as 2021 and beyond provide are predicted to provide serious challenges for the Polish economy as it struggles to recover from the effects of the Covid-19 pandemic, according to a report by Krakow-based research firm, Spectis.
The data from Spectis hints at a maximum 5% drop for the Polish construction industry from the previous year
The "Construction Market in Poland 2020-2027" report focuses on the future of the loosely-defined construction sector and claims to predict its trajectory for the next seven years by analysing various forms of macroeconomic data.
It claims the country's economy is already past the low-point for the short-term economic downturn but states the construction industry has not yet seen the peak of its hardships yet, as it responds to economic shocks after a longer time period.
Coming in from a relatively promising first two-quarters, analysts revised 2020 forecasts upwards, Spectis predicts the market value real change will reach around 3% for the total market, rising to 5% for companies with more than nine workers, compared to the 5-6% drops predicted last spring.
The report attributed the decline to private companies - who they claim have been hit the hardest - not being able to perform enough work to utilise their capacity, a trend they forecast will continue into 2021 and 2022.
They split the construction industry into three main sectors, which they analyse separately to indicate which was hit hardest by the economic downturn.
These three sectors are:
- Non-residential construction (hotels, retail, service and office construction)
- Residential construction (domestic and family-based construction)
- Civil engineering construction (railways, roads, and heavy industry construction)
The report predicts the non-residential construction sector will be the hardest hit by the downturn, owing to the ramifications of the coronavirus pandemic. However, they stipulate that the crisis has only accentuated an already-steep decline for the industry that had been suggested in the data on building permits issued in 2019, which saw a 19% drop on the previous year.
Regardless, the sector is not struggling due to the affected supply lines and trends suggest projects that are underway are able to continue undue problems or delays. The issue, they claim, is owing to a forecast of cancelled or delayed projects going into the future.
Spectis claim the various anti-crisis measures in place - financial shields, interest rate cuts, furlough and job protection schemes and the reopening of the economy back in June - has done its part to mitigate the effects of the pandemic on the residential construction sector. The data also suggests that sharper declines will also be prevented owing to the substantial contribution of the single-family housing segment, which has reported a less severe downturn compared to home builders.
Finally, Spectis claim that projects undertaken by national firms such as the General Directorate for National Roads and Highways (GDDKiA) and PKP Polskie Linie Koleiowe (PKP PLP) can be a major stabilising factor in the civil engineering sector over the next few years.
Regarding the sector of projects run by the authorities, the data hints there is a major risk of investment slowdown. The report claims the local authorities' sector will be the weakest segment of the civil engineering projects in the coming years. However, the decline in local government projects in 2021 will be partly offset by the government-led Local Government Fund, whose budget has been set at roughly €2.6 billion when converted from Polish złoty.
Spectis claim that both national and international funding will be crucial in stimulating economic growth over the next few years, with named initiatives such as Recovery and Resilience Facility for 2021-2023 (€57bn in grants and loans available to Poland) and a seven-year EU budget for 2021-2027 under which Poland can receive €67bn in EU grants. At the same time, projects funded from the EU’s 2014-2020 budget will be implemented until the end of 2023.
They suggest that a combination of several major funding sources means that the civil engineering sector should keep the construction industry’s growth solid in 2022 and 2023.
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