PMR’s latest report, entitled “Construction Industry in the Baltic states 2017: Estonia, Latvia, Lithuania. Development forecasts for 2017-2022”, suggests that, with an average construction growth rate of only 1.3% between 2014 and 2016, Lithuania’s construction output exceeded that of Estonia, where an average annual growth rate of -1.6% was recorded, and considerably exceeded that of Latvia, where the construction industry contracted by 3.7% year on year on average, between 2014 and 2016.
According to PMR, Lithuanian construction output contracted by 9.4% in 2016, the seventh most substantial reduction among the EU countries. Furthermore, the weak performance recorded in the country in 2016 follows a less severe reduction of 3.5% achieved a year before.
In the last few years the Latvian construction industry has also continued to shrink, at an even greater pace than that in Lithuania. Last year, Latvian construction output tumbled by almost 18% in year-on-year terms, after a drop of approximately 1% recorded a year earlier.
By contrast, Estonian construction output exhibited a positive rate of growth in 2016, with a 2.6% increase last year, after a 5.3% reduction observed in 2015. It is worthy of note that the positive result recorded in Estonia in 2016 largely reflected the very low base effect established between 2013 and 2015, with Estonian construction output falling slightly in 2013, followed by a 2% year-on-year reduction in 2014, and another, in excess of 5%, in 2015.
PMR suggests that the key factors which recently contributed to the fall in construction activity in Lithuania and Latvia include a very high base effect, with double-figure average annual growth rates in construction in both countries between 2011 and 2014 (11% in Lithuania and 10% in Latvia) and a reduction in the amount of EU funds disbursed in accordance with the 2014-2020 financial strategy, caused largely by the gap between the two funding periods. Construction activity in the Baltics is expected to rebound to higher levels in 2017, as EU funding picks up in 2017 and higher GDP growth rates are anticipated for all three countries.
The total floor space of residences listed in official records in Lithuania in 2016 rose by 21% year on year to 1.41 million m², which is the most substantial supply in at least twenty years. In Estonia, almost 17% more residential space was commissioned in 2016 than the amount observed a year earlier, whereas in Latvia a 16% reduction was recorded. It is worthy of note that the 2016 housing completion result in Estonia reflected the second best performance in at least two decades. According to PMR, in Latvia, however, the amount of space activated in 2016 was 69% short of the result achieved in 2007, when the most substantial supply since at least 1990 was observed in the country.
