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Artur Eresko | Credits: never slap a gift horse?

Artur Eresko | Credits: never slap a gift horse?

Latvian statisticians have calculated the number of houses, workshops and roads that have not been built.

 

Last year, in comparison with 2015, the volumes of construction products in comparable prices

for calendar-aligned data decreased by 17.8%. In absolute terms, the fall was 318 million EUR.

Overall decline does not look so terrible when looking at construction of engineering facilities in 2016 where 33.3% collapse was recorded.

In 2016, the decline was noted in almost all areas of engineering construction, including ports, waterways, dams and other hydraulic structures - by 31.3%; bridges, overpasses and tunnels - by 29.9%, motorways, streets, roads, runways and railways - by 29.5%.

There are, however, certain areas where life is getting better. Volume of construction of main pipelines, communication lines and electric power transmission lines has increased by 6.2%.

Not everything is so bad in the residential sector. During a year, the increase in construction of residential buildings was 2%. Moreover, if compare the fourth quarter of 2016 with the same period of 2015, then can speak of a boom: construction of residential buildings has increased by 36.5%!

However, emergence of new apartments and power lines could not change the overall sad trend. Latvian construction industry depends too much on the orders of public sector, which in turn is strongly dependent on EU funding. This financing in 2016 was the most meager in recent years.

Thus, development of construction industry is hampered by low utilization of EU structural funds. Although for 2016 a decline in cash flow from the EU coffers was predicted, at the beginning of the year it was impossible to foresee that the financial flow would become so low and, as a consequence, would affect so much the volumes of construction. As a result, the current drop in construction is comparable to the fall in output in the 2008-2010 crisis.

Question of future growth of the construction industry should be put not to Latvian builders but to Brussels bureaucrats who have demonstrated their unpredictability in transferring European subsidies to poor EU countries.

At present, European financing is expected to be received in the second half of 2017. Then new construction sites will appear in Latvia.

It can be also predicted when these construction projects will begin to close again. In 2020, European financial assistance will be sharply reduced. It can be said for sure. But it is, unfortunately, impossible to assert that by this time also private and public investments in the construction sector will grow sharply.

 

Candidate of Economic and Legal Sciences - Artur Eresko (Артур Ересько).