Boston, MA -- (ReleaseWire) -- 02/28/2014 -- The Czech construction industry has suffered greatly from the low levels of investment in the country, in light of a prolonged period of economic hardship within the eurozone, which has sapped the demand for Czech exports. While we have cut our short-term forecasts in light of continued poor performance of the wider economy and a stream of negative official construction data, we do believe that the construction industry will follow the wider economy back into positive growth over the coming years. The recovery is likely to be turbulent and remain heavily exposed to broader macroeconomic trends. That said, with an improving macro picture on the horizon for 2014 and continued support from European investors, we are forecasting positive growth to return in 2015.
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The decline in the Czech Republic's construction industry has come on the back of ongoing economic pressures in the country, which has severely affected both private investment and the government's ability to fund infrastructure projects.
The following factors have shaped our overall bearish view for the infrastructure segment in the country:
- Transport Could See Funding Cuts: In September 2013, David Cermak, the head of the Directorate for Roads and Motorways (RSD) in the Czech Republic, indicated that the transport segment is likely to see significant budget cuts between 2014 and 2016. The RSD expects only CZK35bn to be allocated for transport during 2014, which will be followed by just CZK22bn and CZK4bn in 2015 and 2016 respectively. The RSD, however, hopes that these figures will be revised to CZK33bn for 2014 and CZK25bn for 2015 under the new government.
- End To Renewable Energy Subsidy: It has been announced that the Czech Senate has passed into law a policy that will cut a number of state subsidies for developers of renewable energy projects in the country. Solar power projects received subsidies until end-2013, with hydro, biomass and wind developments only eligible if they are completed before end-2014. The Czech Republic's long-term energy strategy focuses on meeting as much as 80% of its energy requirements from domestic sources, as then Czech Prime Minister Petr Necas revealed in November 2012. For this, the country is pinning hopes on nuclear as well as various forms of renewable energy.
- Nuclear Power To Move Forward?: The Deputy Industry Minister of the Czech Republic has been quoted by Reuters as saying that nuclear power is 'crucial' to ensuring energy security and, as such, the country's nuclear programme must proceed. The estimated timeframe for Temelin 3 and 4 stands at 2023 and 2024 respectively; however, we believe there is significant scope for further delays given the project's track record and the still high levels of uncertainty surrounding its feasibility.
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