Since 2010, Slovenia’s GDP has increased by 12.3%, amounting to EUR 42.7 billion in 2020. Contrarily, this represents a 5.5% decline as compared to the 2019 levels.
In line with the overall economy, the number of enterprises in the broad construction sector increased by 22.7%, from 28,771 in 2010 to 35,313 in 2020, with the real estate activities sub-sector reporting the highest increase of 72.0%, followed by the architectural and engineering activities sub‑sector (+41.8%) over the 2010-2020 period.
In parallel, the volume index of production in the broad construction sector increased by 30.3% over the 2015-2020 period, mainly driven by a 24.0% increase in the production activity in the construction of buildings during the same reference period. In parallel, the production in civil engineering slightly increased by 5.5% between 2015 and 2020.
The total turnover in the broad construction sector stood at EUR 11.2 billion in 2020, representing an increase of 13.6% as compared to 2010
(EUR 9.8 billion). This growth was mainly driven by an increase in the manufacturing (+21.1%), the real estate activities (+13.4%), the narrow construction (+12.2%) as well as the architectural and engineering activities (+11.6%) sub‑sectors over the 2010-2020 period.
Similarly, the gross operating surplus of the broad construction sector recorded a significant increase of 84.4% between 2010 and 2018, reaching EUR 1.3 billion. The majority of this increase was driven by growth in the narrow construction sub‑sector (+102.1%), followed by the architectural and engineering activities (+92.9%), the manufacturing (+89.0%) and the real estate activities (+48.5%) sub-sectors over the 2010-2018 period. Furthermore, the gross operating rate of the broad construction sector, an indicator of the sector’s profitability, increased from 7.2% in 2010 to 12.7% in 2018. This is still lower than the EU-27 average of 16.7%.
In terms of employment, there were 114,321 persons employed in the broad construction sector in 2020, representing a marginal drop of 0.5% as compared to 2010 levels. This was primarily due to the fall in employment in the manufacturing (‑9.0%) as well as the narrow construction (‑1.8%) sub‑sectors, offsetting the rise in the real estate activities (+20.8%) and the architectural and engineering activities (+10.2%) sub‑sectors over the same reference period.
Several initiatives have been launched by the Slovenian government to promote the housing market. Under its EUR 2.5 billion Recovery and Resilience Plan (RRP), Slovenia dedicates 2.4% of its budget (EUR 60.0 million) towards non‑profit public affordable housing so as to mitigate the social impact of the COVID-19 crisis on marginalised people. It also allocated EUR 33.5 million towards digital transformation of public services linked to planning, real estate, nature and water. This involves recasting of the Construction Act and the Spatial Planning Act to reduce the cost and the time taken to become compliant with administrative requirements. The amendment is also aimed at digitalising the key spatial-data systems and streamlining the procedures for obtaining construction permits.
Slovenia’s final RRP comprises EUR 1.8 billion in grants and EUR 666 million in loans. ‘Component 2’ aims to improve the energy efficiency of buildings in the public sector, contributing to sectoral objectives of the National Energy Program .
Slovenia allocated EUR 146.0 million towards renewable energy and energy efficiency, EUR 86.1 million for sustainable renovation of buildings as well as EUR 48.0 million for circular economy – resource efficiency.
With regards to the civil engineering market, the European Commission has allotted EUR 80.0 million for the construction of second track along the Divaca - Koper railway line. Additionally, the European Investment Bank (EIB) has also announced a EUR 250.0 million loan for the project, with the track expected to become operational in 2026. Moreover, the EIB will invest EUR 90.0 million in the modernisation and extension of the Karavanke tunnel linking the motorway between Slovenia and Austria. The EU bank will also fund a EUR 95.0 million loan for linking the existing Austrian highway to the new 8km tunnel.
While these policy initiatives will support the development of the construction sector, the latter faces two major issues. Firstly, the issue of late payments squeezes liquidity in the sector. The outbreak of COVID-19 pandemic has made the situation even more difficult. As per the Intrum European Payment Report 2021, about 54.0% of Slovenian businesses acknowledged that COVID-19 pandemic has resulted in liquidity challenges for debtors, making collection of prompt payments in the next 12 months a major issue for the businesses. Secondly, the existing shortage of skilled labour and digital skills continue to be a major concern for the sector.
Overall, the Slovenian construction sector has a positive outlook in the medium and long term. Non-residential and civil engineering market are expected to be the primary growth drivers. Public sector infrastructure, digitalisation, transport system upgradation and shift towards a circular economy, supported by EU funding, are expected to dominate the sector’s growth.