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Analysis: Construction drop expected, growth seen by yearʼs end

Construction

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The drop in Hungary’s construction output in the first half came as no surprise, and the next four to six months can bring a change in this trend, Gábor Lipcsei, the president of engineering and project management firm Óbuda Group, said in a commentary sent to the Budapest Business Journal today.

Based on the figures of the past few years, the drop in recent months was expected, chiefly due to the sector’s dependency on European Union and government funding, Lipcsei said in his analysis, commenting on the 17.6% fall in the volume of Hungary’s construction output in July compared to the same month a year earlier, as reported by Hungary’s Central Statistical Office (KSH) today. Output in the two main groups of construction moved in opposite directions: while construction of buildings increased by 1%, civil engineering works fell by 31.8%. 

This year has been characterized by stagnation overall, the analysis noted; however, subsidies recently launched by the Hungarian government are set to boost construction of residential buildings in the last one and half years of the current governing cycle. This is reflected in the increasing amount of preparations and design processes, and also in the growth of new contracts, Lipcsei added.

Labor shortage hits construction sector too

At the same time, due to the fluctuations of the last few years, qualified architects and construction professionals have seen a significant capacity shortage, while the emigration of qualified professionals is continuous, according to Lipcsei. This can easily lead to performance, quality and time frame risks, according to the analyst, which should be considered by entrepreneurs and investors in the sector, who are advised to make thorough preparations and invest in risk management.

The sector could raise wages or invite labor from abroad to tackle the labor shortage the field has seen, noted Lipcsei. As neighboring EU countries have seen growth or stagnation in construction output in the short term, higher price increases might be seen in the construction of non-residential buildings than external factors and inflation might reasonably generate, the professional noted.

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