Construction – fast-growing industry

 
Photo: Stock.XCHNG

CONSTRUCTION AND CIVIL ENGINEERING IN BRIEF
• Construction production volume amounted to EUR 1,2379 billion in 2011, a 12,3% increase on 2010.
It is predicted that construction production volume will grow 17,8% in 2012;
• The construction industry constitutes 10% of Latvia’s business turnover and employs 12% of persons involved in business activities;
• EUR 56,9 billion worth of construction works were carried out abroad in 2011.

• EU funds’ absorption currently dominates in the industry, mainly regarding infrastructure objects. Construction projects are mostly imple-mented in road construction, communications, port and railway segments, where a positive development trend is expected, indicating influx of money in Latvia’s economy.
• In 2011, construction growth was based on non-residential objects, for example – production facilities and highways – mainly funded by the EU. 18,6% growth in the number of issued construction permits indicates that businessmen remain optimistic and continue investing. Most construction permits – 1 849 – were issued for single apartment buildings, 6,8% more than in 2010.
• The number of issued construction permits related to export industries increased 24% and was mostly constituted by industrial production facilities and warehouses.
• Over the past three years, the competitiveness of construction specialists and construction companies has allowed the industry’s businessmen to reorient to foreign markets and considerably increase construction export.
• The construction industry continued to grow in 2012. Construction production volume increased 17,8% at constant prices in the first nine months of 2012, compared to the respective period in 2011. Building construction rose 14,3%, engineering construction – 19,4%. The Economy Ministry points out that the construction industry could grow 8,3% in 2013 and 4%-6% each year until 2016. In 2011, GDP growth in construction amounted to 12,4% year-on-year. In the first nine months of 2012, more construction permits were issued for production facilities and warehouses than in the corresponding period in 2011. According to the Central Statistical Bureau’s data, 184 construction permits were issued in these segments in the first nine months of 2012, compared to 175 in the same period in 2011.

Building materials exported to more than 60 countries
• The local market stagnated during the crisis and many Latvian construction companies sought projects abroad. Local construction companies carried out more than EUR 80 million worth of construction works abroad in 2011, compared to EUR 24 million in 2008. At the moment, construction companies Skonto būve Ltd, JSC RBS Skals, TIVO būve Ltd, Zemgales Tehnoloģiskais centrs Ltd, Arbo Ltd, R&Re Ltd and others perform various construction works abroad.

• Meanwhile, the Latvian Association of Building Material Producers, which brings together the country’s ten largest producers, exports its production to more than 60 countries, including the European Union, the United States, Canada, Norway, Croatia, Russia, Belarus, Ukraine, the United Arab Emirates, Korea, Algeria, Japan, India, Kuwait and other countries. Its production volume has grown 20% on average over the past two years. The association predicts similar growth in 2013.
• Cemex new cement plant in Brocēni was one of the largest investment projects in building material production in the past few years. EUR 310 million was invested in the plant’s construction.

Most important construction projects in 2012
• Several construction works of national importance were launched or signed in 2012.
• The new building of the Latvian National Library will be completed in September 2013. The project’s costs could total EUR 30 million.

Road construction costs up 40%
• Road construction costs grew 40% in 2009-2011, leaving the most significant impact on road construction companies in 2011.
• An increase in oil prices had the largest impact on infrastructure construction costs. Transport and equipment costs grew alongside the prices of asphalt concrete, splinters, sand and other materials, as well as energy costs.
• Road construction costs stabilized in 2012. However, construction works are mostly carried out with the help of EU funds, which will run out this year.

Market forecasts
• Commercial banks continue to issue loans cautiously, which does not facilitate investment attraction in construction. It is predicted that the number of private orders will increase on the local market, construction production export will continue to grow and increasingly more companies will seek opportunities on foreign markets. The association of construction companies predicts that construction volumes will reach EUR 1,42 billion per year in Latvia during the next five years, a 5% increase per year.

Largest construction companies in terms of net turnover in 2011

 Source: Firmas.lv


Useful links

Latvian Association of Builders 
SJSC Latvijas Valsts
Latvian Association of Building Material Producers 
Association Latvijas ceļu būvētājs