The Baltic States

The Economic sentiment of the Baltic States has deteriorated due to weak investment growth. In 2016 the overall economic growth in the Baltic States decelerates to some 1.7 %, which is the slowest after the financial crisis in 2009. The consumers’ situation is strong at all the three countries lead by strong real wage growth – private expenditure is the most intensively growing GDP component respectively. Job market development has been strong.

The access to EU funds is hindering the total construction sector output across the Baltic countries. Construction sector turned into a recession in 2015 declining some 3 % as the previous EU funding period ended. In 2016 the decline will be even stronger exceeding more than 6 % as the civil engineering segment is experiencing a downturn. The total construction output forecast was revised down as the outlook for civil engineering deteriorated sharply. The transit from the previous EU funding period to the new one has been smooth.

Residential construction is the segment experiencing the most positive environment. The exterior factors support housing construction as the peoples’ living standards are rising along with their disposable income. The regional variation within the Baltics has been notable – strong development in Lithuania has been crucial for the whole industry. The outlook suggests favorable development and high volumes to continue. The Latvian housing construction market is in a slump and it will bottom out in 2016 after the third consecutive years’ of decline.

Non-residential construction is contracting in 2016. The regional variation has been strong as the Latvian construction sector recession has hit especially harsh the non-residential sector. On the other hand, Estonia’s non-residential construction is at history-high figures.  Renovation of non-residential premises is experiencing notch at all the Baltic States as the access to EU funding has been postponed continuously.

Civil engineering is the segment, which’ outlook deteriorated the most. As the sector is strongly dependent from the funding from the EU funding, the postponement in absorption of the funding for the new period has been devastating for the industry. However, the development is only temporarily and is expected to turn in growth in 2018.

Russian construction markets

Russian economy as also its construction markets is in recession but the first signs of beginning of the economic recovery are already visible – the economic sentiment has improved and the prices for export products have increased. The economic growth is expected to take off in 2017, even though the pace will remain modest at 1 %.

Construction industry fell into recession already in 2014 before the economic slowdown when the sector contracted by 2 %. Despite the economic growth is taking off next year, construction is going to further decrease by some -1.7 %. The federal budget, as also the regional budgets, are extremely tight and under constant pressure of further cut-offs and public sector investments are not able support the construction sector in the current economic downturn. All the sectors of construction are declining in the current forecast period of 2013–2019.

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