Czech Republic Infrastructure Report Q1 2008

The Czech Republic boasts a vibrant construction industry, which has been a key driver of the country's growth. Valued at US$9.45bn in 2006 and having recorded a year-on-year (y-o-y) growth of 6.6% during the year, the construction industry is currently undergoing a high-growth phase that started in 2002-2003.

This report forecasts the industry to grow at an average rate of approximately 8% during 2008-2012.

With some support from European Union (EU) funds, the state has been investing in infrastructure development on a large scale. Furthermore, the government has embarked on a privatisation drive, channelling the generated proceeds towards infrastructure growth. A stable business environment has also made the Czech Republic an attractive foreign-investment destination. The nation also boasts one of the longest rail and road networks in central Europe. The country is fast becoming a hub for automobile manufacturing. In addition, the recent tourism boom in Prague has spurred the development of hotels.

Housing construction in the country is also set to benefit from the growing availability of mortgage facilities and constantly improving living standards. Major projects planned or currently under way include the construction of a new airport near Prague, reconstruction work at the Pardubice airport, South Korean Hyundai's automotive plant in Nosovice, and state-led highway and road development programmes.

However, the impressive performance of the country's infrastructure sector is somewhat marred by high levels of corruption and corporate taxation. Further, safety norms and standards imposed by the EU have increased construction costs in the country. The country's labour market infrastructure could also do with some improvement.

The Czech construction industry is expected to reach a value of CZK471.34bn (US$20.91bn) in 2012, contributing 10.49% to the country's gross domestic product (GDP). Strong foreign direct investment (FDI) inflows are likely to continue in the spheres of industrial and commercial construction. Increased consolidation may be seen in the industry in coming times.