Uncertainty in the construction industry – what future awaits construction?
The construction market is the branch of the economy that, despite initial concerns, has not yet felt the full negative effects of the COVID-19 epidemic. However, major disruptions observed in other industries, changes in the commercial real estate market, and financial problems of local governments strongly affect the prospects of the market not only in the coming months but also in the years ahead.
Find comprehensive information about the current state of the Polish construction sector in the PMR report:
Construction sector in Poland. Market analysis and development forecasts for 2023-2028. Impact of inflation and war in Ukraine.
Key role of public investments
In the second quarter of 2020, we experienced an unprecedented lockdown in social life and the economy. As a result, for the first time in three decades, the Polish economy went into negative territory. In such circumstances, the role of the State and public investments becomes crucial. Hence, the special role of infrastructure investments, which are now becoming not only a stabilizer in the construction market but also in the entire Polish economy.
The pandemic not only did not cancel road investment plans but even increased the determination of the authorities to drive the economy through this channel. Additional money follows the declarations, and they are concrete. The June update of the National Road Program brought an additional PLN 21 billion, which will start flowing into the construction market from 2022. In late August, a law was passed to allocate more funds for local roads as well. The budget of the Local Roads Fund is expected to be increased by PLN 3.8 billion this year. It is also worth noting that road works in Poland are currently well underway. The expenses of the General Directorate for National Roads and Motorways (GDDKiA) in each of the seven months summarized so far were higher than in the corresponding periods of 2019.
The National Railway Program is also almost entirely allocated. According to the latest data from PKP PLK, investments worth over PLN 51.3 billion are currently being implemented (investment projects worth PLN 13.9 billion have already been completed, and additional projects worth PLN 4.8 billion are in the tender procedures). Importantly, representatives of PKP PLK announce that they already have investment projects ready beyond the current EU budget perspective, with a value of approximately PLN 40 billion, which are to be realized under the classical “build” system. They are only waiting for funding to be allocated, so there is hope that there will be no investment gap after the implementation of the current investment program.
The government is also not backing down from its gigantic investment plans related to the Central Communication Port (CPK). It is not only a mega-airport but also railway lines connecting it with major cities in Poland. The first contract for work related to the inventory of the natural areas on which the railway investments will be carried out (Warsaw-Łódź route) has already been signed. The modernization of the Warsaw Zachodnia station, which is beginning, will include an exit towards CPK. The gross value added to GDP generated by this investment in the Polish economy amounts to PLN 126 billion (value of the construction phase), and the realization of all its related components will involve several years of construction work.
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Construction Business Unit Director