Hungary for growth

Recovery is forecast for the Hungarian construction industry from 2013, after a poor 2009 to 2012 period, according to research company PMR.

A visible market recovery is expected, and the growth in 2013/2014 will result from the intensive execution of EU co-financed infrastructure investments, as well as some revival in building construction - particularly in non-residential buildings.

According to PMR's latest report, Construction Sector in Hungary 2012 - Development Forecasts for 2012 to 2014, a weak macroeconomic environment, falling investment demand and poor household finances has meant the Hungarian construction sector has been in recession since 2006.

As a result, the gross value added in construction in 2011 was almost one third lower than in 2005. However, in the last quarter of 2011, the year-on-year decline of value added decelerated to just 1.4%, which PMR said was a direct result of accelerating public investment financed by EU funds.

After 2012, the improving macroeconomic condition and higher public investment are likely to finally reverse this negative trend, it said.

The financial crisis affected the Hungarian engineering construction sector badly and PMR identified the main problem as being that the government, which is primarily responsible for the construction of transport infrastructure, did not have the budget to finance constructions.

Since 2000, when it totalled 571km, the motorway network has more than doubled, and 65km of new motorway and expressway were completed in an average year. Last year was weak with the opening of only 31km, and PMR expects another weak year in 2012.

As a result, PMR expects a fall of approximately 4% in engineering construction output for 2012. It said the forecast for 2012 was also supported by the volume index of new orders among engineering companies. In 2011, the volume of new orders decreased by 16% year-on-year. At the beginning of 2012, the volume index shows an increasing trend, so from 2013 and 2014 PMR expects a slow increase in civil engineering.

Nuclear plant expansion

In years to come, the largest planned project involves the expansion of Hungary's only nuclear power plant, in Paks. Construction at the power plant is estimated at €8 billion to €10 billion. The purpose of the expansion is to increase the capacity of the reactors to serve the growing energy needs of the population. After the expansion, the reactors would be in operation until 2032 to 2037.

In non-residential construction, the industrial and warehouse sector is expected to recover from the crisis first. PMR said the wholesale and retail sector would continue to suffer not only from the moderate consumption and as a result of poor demand, but also from a government regulation that will prevent the issuing of building permits to many huge retail construction projects until the beginning of 2015. It is unlikely that any large developments will start in 2012, said PMR. However, it is expected that the sector will recover by 2015.

Although non-residential investors are not starting any new projects, they are initiating construction work, and many buildings are being modernised and renovated. The signs of recovery will be first visible in 2013, said PMR, when an increase in output may take place.

It added that at the moment, though, it seemed that restoring construction industry's non-residential sector would be a slow process. It said the fact that an increase was being forecast for 2013 was also a result of non-residential construction output in 2011 and 2012 being so low that even a slight positive change in the economic atmosphere and business confidence could improve the situation.