In regard to the structure of Serbia’s economic growth, there is one sector that has made a big contribution to the growth slowdown – that is construction, which in the first quarter, recorded a 1.5 percent decline.
Perhaps that is why recently, after the session of the Council for Coordination of Activities and Measures for the GDP Growth, Prime Minister Ana Brnabić, underlined that construction is the key area for the country’s reaching 2.5 percent growth, the estimate given by the Ministry of Finance.
The authors of the Quarterly Monitor newsletter, a publication published by the Faculty of Economics in Belgrade, wrote last year that high inflation would reduce household disposable income, which, in turn, would reduce the demand for real estate. Also, interest rates in the European Union have significantly increased, and since construction is mainly financed by loans, borrowing conditions for real estate developers are now significantly less favourable, which has also caused a decline in construction.
“Furthermore, the costs of labour and building materials have significantly increased compared to the pre-crisis level, and as a rule, the real estate market adjusts its activity to the price fluctuation, so in the immediate future, we can expect to see a decrease in the number of constructed properties, rather than a significant drop in prices,” the Quarterly Monitor wrote last year and one year on, that’s exactly what happened.
In the first quarter of 2023, construction activity in Serbia, compared to the same period last year, fell by 0.5 percent. The value of construction works is lower by 20 percent compared to the first quarter of 2022. However, it still seems that the tendency of the drastic decline in construction from the previous year is slowing down. Capital investments contributed to this, as construction activity increased by 14 percent in terms of the construction of roads, pipelines and complex industrial buildings. These data indicate that construction activity is kept above water by infrastructure projects funded by the state and while privately-funded construction activity continues to fall.
Since the construction sector’s share in the added value in the national GDP is about five percent, the construction industry plays a significant role in GDP growth. According to data collated by the Serbian Chamber of Commerce, the export of bricks, cement, concrete, mortar, stone and other raw materials for construction in 2022 amounted to 95.8 million euros, which is 41 percent more than in 2021, and at the same time makes 0.3 percent of Serbia’s total exports of goods.
Last year, construction services worth 193.1 million euros were exported abroad, which represents a year-on-year drop in exports of 14.4 percent.
The total value of works carried out by construction companies from Serbia abroad in 2022 amounted to 19,950 million dinars. Serbian construction companies had the highest construction activity in the Russian Federation (45.3 percent of the total value of the works performed), followed by Germany (13.7 percent), Uganda (13.3 percent) and Romania (5.3 percent).
Just over 1,500 Serbian construction workers were employed abroad, that is in Germany, The Netherlands, the Russian Federation and Montenegro.
(Bloomberg Adria, 10.07.2023)
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