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Czech Republic Infrastructure Report Q1 2012
Business Monitor International, Nov 2011, Pages: 84
Business Monitor International's Czech Republic Infrastructure Report provides industry professionals and strategists, corporate analysts, infrastructure associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Czech Republic's infrastructure industry.
BMI View: The Czech Republic has fared far better than much of the region and the power sector has provided a huge boost to the infrastructure sector, thought the future is slightly less certain in a global economic environment that is struggling. The Czech Statistical Office reported that the country's construction production dropped by 5.7% year-on-year in Q211. Domestic austerity measures are tugging on consumer demand and dropping export values will continue to pull down construction sector real growth as a whole.
Key developments in the last quarter included:
- Poland's state-owned gas pipeline operator, Gaz System, and Czech company Net4Gas have completed a new 0.5bn cubic metre (bcm) gas link between the two countries. The pipeline has been completed earlier than expected and launched in September 2011. The pipeline is part of a broader move to increase interconnectivity between different national gas networks, increasing European resistance to gas supply shocks and helping to integrate potential new sources of gas into the Central European gas network.
- RWE Transgas, the Czech unit of German giant RWE has announced it will halt plans to build a 1,000MW gas-fuelled power plant near Prague, as the utility company instead focuses on projects in Poland and Turkey. The decision is part of the company's restructuring in the aftermath of Germany's nuclear u-turn. While BMI believes the new facilities in the Czech Republic would be better connected to the German power market, which is expected to require more imports,; the decision to focus on Poland and Turkey is also strongly linked to their future gas availability potential.
- Swedish construction and engineering company Skanska secured a CZK3.7bn (US$222mn) contract from the Department of Public Transportation to extend line A of the Prague subway in the Czech Republic. The line will be extended by 6km, with the addition of four stations. The work involves constructing energy installations, as well as fitting air-conditioning and communication systems in the subway. The project, which began mid-2011, is scheduled to be concluded in the autumn of 2014.
BMI currently holds to its forecast for the Czech Republic's current account deficit to decreasewiden slightly to 3.94.0% of GDP this year, before falling back from 2011's estimated figure of 4.0%to 3.9% in 2012. BMI maintains that the dynamics that have historically driven the Czech balance of payments will remain in play. Growth in the income deficit, due to recovering global business, will outstrip a rise in the merchandise trade surplus, driven by strong export performance.
Ructions within the Czech Republic's centre-right coalition will continue to challenge the government's cohesion. However, as a result of the common goal of promoting fiscal sustainability, BMI is increasingly seeing less scope for its view of a re-shuffling of the coalition to play out.
BMI does not expect an easing of tensions in the coming months between the parties of the ruling centre right coalition, however is increasingly seeing less scope for its core political scenario to play out - a re-shuffled coalition by yearend. This is due largely to BMI's view that the parties in the coalition will look to avoid facing early elections, given their deteriorating support and rising popularity for the opposition, the Czech Social Democratic Party (CSSD).
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