Czech Republic Freight Transport Report Q3 2009

The Czech Republic is feeling the squeeze of the global economic slowdown, but the latest quarter did nevertheless bring progress on some fronts, particularly in the energy sector. BMI's latest forecast is that construction spending will amount to CZK205bn in 2009 , down from the CZK211bn we were forecasting only one quarter ago. The figure represents a slowdown from the CZK209bn that the national statistics office says was spent on construction in 2008. Construction's decline is, of course, in line with the country's general economic slowdown.

Forecasting beyond 2009, BMI sees construction industry value rising to CZK213bn in 2010, a 1.9% rise in real terms, and to CZK228bn in 2011, a real increase of 4.3%. We expect growth rates to accelerate to above 5% in the years after that. Such optimism is based upon the current global economic crisis coming to an end and recovery taking hold.

The Czech Republic has a number of factors that can cushion the blow of the current slowdown. As a key country at the crossroads of emerging economies and powerful EU economies such as Germany and Austria, Czech infrastructure development will find advocates beyond the country's borders. And because the construction industry represents a relatively large part of the economy - and the work force - political pressure for government stimulus to soften the slowdown will be greater.

The latest quarter includes some signs of infrastructure investment in the energy sector and residential and commercial construction. The CEZ Group's plans to expand the size of the Temelin nuclear plant got some political support even if environmental assessments remain outstanding and construction is not scheduled to begin for another four years. Several renewable projects were also announced in the latest period.

The government is proceeding with the sale of the national airline, but the latest quarter brought mixed signals about the privatisation of Ruzyne airport in Prague. Parliamentarians have made noises in opposition to a sale when asset prices are low, but the government is so far sticking to its plans to proceed with the sale. Since the government is currently an interim one - until elections expected in October - the outcome of this disagreement is impossible to predict.

In the residential and commercial construction sector, at least two new projects were announced and Plaza Centers said it is resuming work that it was forced to halt at the end of last year. Given that the projects are led by different companies, the announcements suggest that investors are finding the funds needed to move ahead. Because the current economic slowdown began as a credit slowdown, any sign that credit is again becoming available should boost optimism about the future.