In 2020, Slovakia’s GDP reached EUR 84.9 billion, registering a 20.8% increase as compared to its 2010 level. Contrarily, this represented a drop of 4.8% against its 2019 level.
In line with the overall economy, the broad construction sector in Slovakia, after experiencing some positive developments as from 2010, observed some difficulties in 2019. With regards to the number of enterprises in the sector, while it grew by 2.8% between 2010 and 2020 (123,905 in 2020), it significantly declined as compared to 2019 level ( 15.8%). This is probably explained by the advent of COVID 19 pandemic.
In contrast, the volume index of production in the broad construction sector declined by 12.0% over the 2015 2019 period. In 2020, the index further worsened because of the impact of the COVID-19 pandemic, decreasing by -3.6% with respect to 2019. Likewise, the volume index of production in the construction of buildings and civil engineering also dropped by 12.4% and 25.2% over the 2015-2020 period, respectively, thus also reflecting the negative impact of COVID-19.
Similarly, the total turnover in the broad construction sector increased by 25.7% between 2010 and 2020, reaching EUR 18.4 billion in 2020. In contrast, it witnessed a decline of 11.6% as compared to 2019 levels, mostly due to COVID 19 pandemic outbreak. The increase over the 2010 2020 period was driven by the growth in the real estate activities (+69.0%), the manufacturing (+53.3%), the architectural and engineering activities (+47.6%) and the narrow construction (+4.2%) sub sectors. However, compared to 2019, the total turnover of the broad construction sector decreased by 11.6% in 2020, with the largest decline recorded in the narrow construction sub sector ( 21.0%). This was followed by the architectural and engineering activities ( 5.0%) and the manufacturing ( 1.4%) sub sectors.
In contrast, the gross operating surplus of the broad construction sector amounted to EUR 2.7 billion in 2018 , a 2.8% drop from 2010, owing to an increase in construction costs. The largest decrease in the gross operating surplus was registered in the narrow construction sub-sector ( 11.3%), followed by the real estate activities sub sector (-0.9%). In contrast, the gross operating surplus in the architectural and engineering activities and manufacturing sub sectors recorded increases of 41.4% and 9.0% respectively, over the 2010 2018 period.
Similarly, the gross operating rate of the broad construction sector, which gives an indication of the sector’s profitability, decreased from 18.9% in 2010 to 13.2% in 2018, below the EU-27 average of 16.7%
In terms of employment, there were 235,532 persons employed in the Slovak broad construction sector in 2020, representing a drop of 8.5% over 2010. This was mostly due to a decrease in employment in the narrow construction ( 20.7%) sub sector offsetting the rise in employment in the real estate activities (+51.0%), the manufacturing (+2.7%) as well as the architectural and engineering activities (+2.0%) sub sectors during the same period.
Meanwhile, the housing market in Slovakia is characterised by increasing house prices. In fact, the house price index for total dwellings in Slovakia increased by 45.1% over the 2015-2020 period, mostly supported by a growing demand driven by lower interest rates and a growing urban population.
In parallel, the housing supply is not expected to fully meet the demand in the near future, especially in urban areas. In June 2021, the number of completed dwellings stood at 4,872 units, marking a significant decrease of 28.5% from the previous number of 6,810 units recorded in December 2020. Additionally, following the outbreak of COVID-19 and market related uncertainty, the preparation of new projects for house (dwelling) buildings has been further delayed. Therefore, it is expected that there will be a significant gap in the outputs of the building sector in 2021.
Under the National Recovery and Resilience Plan (RRP)Slovakia has allocated EUR 801.0 million towards development of sustainable transport, EUR 728.0 million towards building renovations, EUR 615.0 million towards developing digital Slovakia, EUR 368.0 million towards decarbonisation of the industry, and EUR 159.0 towards climate change adaptation.
Slovakia also aims to renovate 30,000 single-family buildings and 117,000m2 of historic public buildings by 2026, thereby achieving at least 30.0% primary energy savings. The country set an indicative investment requirement of EUR 6.9 billion by 2026, with its RRP contributing about EUR 776.0 million towards renovation.
With regards to the Slovak infrastructure, the majority of the construction work is supported by EU funding. For example, two important EU backed projects include D1 and D4 (a Public Private Partnership supported by EIB funding) motorways, forming an integral part of the Trans-European Transport Network (TEN-T). The Slovak government has also announced investment commitments up to EUR 2.9 billion to improve roads in the Upper Nitra coal mining region. In November 2020, the Slovak government signed an agreement with the Railways of the Slovak Republic (ŽSR) to modernise the Žilina railway junction.
Presently, the Slovak construction sector faces a number of issues including a shortage of skilled labour workforce, as well as low innovation rates. Moreover, the Slovak construction sector also suffers from rising cases of late payment, partly linked to the advent of COVID-19. As a result, the total value of outstanding B2B invoices in Slovakia increased from 23.0% in 2019 to 49.0% in 2020. This may also lead to additional business insolvencies in the construction sector.
Overall, the Slovak construction sector has a positive outlook in the medium and long term. Despite residential buildings being the largest construction segment, non-residential and infrastructure construction – often supported by EU funding – are expected to be the primary growth drivers.