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Latvia Infrastructure Report 2010
Market |
Construction |
Report Type |
Market Research |
Country |
Latvia |
Published |
18 January 2010 |
Number of Pages |
55 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
File Format |
- |
This quarter we have introduced a new data series for infrastructure and its subsectors (transport and energy & utilities). This is an effort to address a significant deficiency in the availability of globally comparable, infrastructure-specific indicators and forecasts across a wide range of countries. Our new infrastructure data series enables users to quantify trends and growth patterns in the infrastructure sectors of the 35 main emerging and developed markets out of the 62 countries in our infrastructure service. The outlook for Latvia's construction sector is grim. The country has suffered particularly badly during the global economic downturn, with severe year-on-year (y-o-y) declines in percentage GDP growth recorded during various quarters of 2009. There have been significant falls in capital investment by both the private sector and the public sector (the latter has been hamstrung by severe fiscal constraints generated by the financial crisis and global economic downturn). Furthermore, the country is likely to remain mired in recession in 2010.
Against this backdrop, we estimate that Latvia's construction sector activity contracted by 34% in real terms in 2009, taking the nominal value of the local construction industry down to US$1.35bn, from US$2.41bn in 2008. We also estimate that government capital investment fell from US$970mn in 2008 to US$660mn in 2009. Infrastructure spending has not been a priority, given the strain on the public finances generated by the economic downturn; even politically sensitive spending has been slashed. To give an idea of how badly Latvia has been affected, public sector wages were slashed by 40% in the 2009 budget, while pensions were reduced by 10%, according to Reuters.
Total capital investment in Latvia during 2009 (inclusive of the private sector) plunged from US$9.28bn to an estimated US$5.36bn. Given that we anticipate the recession to continue into 2010 (thereby maintaining pressure on the public finances and private sector construction activity), we predict that total capital investment will continue to fall, to an annual value of US$4.44bn in 2010. Real construction sector growth, meanwhile, will record another significant decline in 2010 – this time of 13.3%, according to our core forecasts. The year 2011 will then see the construction sector register very modest real growth (1.5%), before recording average annual real growth rates of around 2% across 2012-2014.
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