In Latvia the volume of construction produce in the third quarter of the last year, if compared with July – September 2015. crashed by 22%, which appeared to be the largest fall in the EU, as evidenced by the Eurostat data on all 28 countries.
The reasons of construction problems are not secret. The current position is largely explained by the macroeconomic problems in all countries. Over nine months GDP of Latvia, in relative prices according to seasonally unaligned data, grew merely by 1.4%. This, in its turn, is connected with the shrinking of investments and weak absorption of the EU funds.
The drop in volumes in the construction sphere against this background seems quite logical. And it is clear that delay in the absorption of the EU funds is inexcusable.
If the situation does not change, then the drop in turnover in the construction industry this year would make up 15-20%. Obviously, that’s not good, since the enterprises of the industry employ about 70 thousand people. It means that a part of them would be fired; the other part would search for job abroad. Undoubtedly, bankruptcies would turn up as well.
Now, if to imagine that money from the EU funds goes to the industry the other day, then all the same the growth in the construction volumes would happen not earlier than in the fourth quarter of this year.
But, apart from shortage of money, there is yet another problem – the abundance of financing. If the co-financed projects of the European Union fail to be spread equally, then in 2018 Latvia might undergo an artificially created by the state bubble in construction. This would be the time of the beginning of implementation of not just projects co-financed from the EU funds, but also of infrastructural projects of the European programme Connecting Europe facilities — electrification of railways, third electrical and energy connection between Latvia and Estonia, Kurzeme arc from Ventspils to Riga, etc.
We should also consider the fact that 2018 is the last year, when the EU money will be available for road construction. The enterprises of the industry would struggle for workers, therefore, wages and fees for services of specialists would, most likely, rise. At the same time, risks for the quality of work performed might appear.
It is planned that in 2017 investments in construction will exceed 600 million euro. In 2018 the growth by 8%, but in 2019 – yet by 10% is planned. Such rise would inevitably affect quality, productivity and result in price hike.
The industry would have to find additional 6-10 thousand workers, which would be also difficult to do. It is impossible to find qualified workers within such short period, therefore, it would be necessary to think about outsourcing quest workers.
As a result, after financial ‘dry spell’ the survived constructors might encounter money “flood”. The Latvian economic climate obviously does not contribute to calm, predictable development of the construction industry.