The Baltic States
The economic growth has been among the fastest in the European Union in the Baltic States for the past couple of years. Now the Baltic countries are among those countries suffering the most from the prolonging dispute between European Union and Russia. However, they have managed to dodge the spillover effects from the conflict quite well. The GDP will grow by 2.9 % per annum for the three Baltic States in the three years 2016–2018.
Overall construction output in 2016 is expected to decrease by 0.5 % for the three Baltic countries as the absence of the EU Cohesion funding is hindering the growth. Labour market development has remained favourable in the Baltics. The job creation has continued and is supporting the domestic demand in addition with low inflation.
In 2015, Estonia had a GDP of €20.5bill – 1.1 per cent increase over 2014. The economic growth is expected to be 2.0 per cent in 2016 and accelerate around 2.5–3 per cent in 2017–2018. The estimated value of construction in 2015 was about €2.98bill which equals to growth of 1 per cent over 2014. The volume is expected to increase in 2016 some 3 per cent due to new non-residential building.
The building construction will support the growth as the new non-residential production is taking off in 2016. Housing construction has grown sharply but will diminish due to high supply in the markets .
Latvia’s GDP stood at €24.4bill in 2015 – an increase of 2.7 per cent over 2014. The economic growth expected to be 2.7 per cent in 2016 and accelerate 3.0 and 3.5 per cent in 2017–2018 in respectively. The value of construction declined 8 per cent in 2015 to €3.35bn. The year 2016 will be also negative and forecast is -6 per cent.
Latvian construction sector is currently in non-favourable situation and in strong headwind. Construction sector contracted from stem to stern in 2015 and the plight will continue in 2016 due to poor performance in non-residential sector and absence of EU funding.
In 2015, Lithuania had a GDP of €37.1bill – an increase of 1.6 per cent over 2014. Lithuania entered the Eurozone in the beginning of 2015. Current outlooks for the economic growth in 2016 stand at around 3.0 % and the same at annual 3.0 % for years 2017–2018. The estimated value of construction in 2015 was €5.1bn. The total value of construction decreased 3 per cent in 2015.
Building construction continued to enjoy positive growth volumes in 2015. Housing sector is drawing the total construction output into rise in 2016 as the consumers’ solid standing enable further construction.
The Russian economy is in recession. GDP contracted by 3.7 per cent in 2015. Investments have also shrunk clearly. The price of oil dropped further in the second half of 2015 which will contract GDP this year by around 3 per cent.
In 2016 domestic demand will also be reduced e.g. by the quite high inflation that cuts purchasing power and government spending in real terms. Russia uses much of its reserve funds to support its economy. The sanctions policy remains in place for mid-year 2017. The positive aspects are the recovery of the oil prices, and also the lowering inflation, which is enabling the central bank to ease its monetary policy
As is the economy, also Russian construction industry is in recession. Construction volumes decreased notably in 2015 and will further decline in 2016–2017. Consumer standing and poor demand restricts residential construction, while non-residential market is shadowed by deteriorated investment climate. The civil engineering is hurt by the pressures to keep budget deficit in minimum.Back to reports