Central European Construction Market Report 1Q 2023
Slovakia
Gross domestic product
Slovakia managed to sustain gross domestic product (GDP) growth in positive figures despite ongoing pressures from the war in neighbouring Ukraine.
Eurostat recently reported the local Consumer Price Index (CPI) at 15% in December, very similar to the national inflation rate reported at 15.4% and steadily above the European Union average which closed at 10.4% in the same month.
The Organisation for Economic Co-operation and Development (OECD) maintains a conservative forecast of inflation recovery in 2Q 2023 while others expect a decline as early as this quarter.
Construction materials
The industrial producer price index below shows key items which saw recovery in 4Q 2022, such as HVAC and electrical distribution. Wood, steel tubes and structural metals also had modest recoveries in the same period.
Commodity pricing has declined significantly since April but energy costs have caused operating and production expenditure to increase.
Local FIDIC method price review indices show two items which have produced savings:
Contracts
As the supply chain has become more stable, contractors prefer short-term agreements and are even open to lump sum pricing mechanisms.
For longer contract requirements, open book or construction management procurement methods are the preferred options for contractors and owners alike.
Market outlook
Projects with low profit margins or extensive bank financing are still on hold. Residential sales declined dramatically due to the effects of rising interest rates; only financially strong investors with well-situated projects are moving forward. The office and logistics markets remain active.
As market pressures continue, having an independent, local advisor such as Gleeds is paramount in risk avoidance, as the pre-qualification phase of any procurement exercise will rely on selecting the best indicated companies for seeing projects through to completion.
Gleeds advises regular project budget updates that take into account recent market pricing and local risk factors which may impact project programmes and costs. Risk analysis studies are recommended to better evaluate and prepare appropriate contingencies for your particular project conditions and risk exposure. Additionally, we are advising investors to consider inflation contingencies in their budgets as materials and labour shortages remain an issue.
Eurovea, Bratislava, Slovakia — Gleeds provided Quantity Surveying/Cost Management services.
