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Construction output plunged 21.9% in November 2009 compared to the same month a year ago, according to preliminary data from the Bulgarian National Statistical Institute (NSI) published on January 11. Construction of buildings dropped 28.3% while civil engineering was down 8.5%. Because buildings account for the lion’s share (62.3%) of total construction output, their decline weighed heavily on the overall Construction Production Index.


Total construction output in November 2009 was down 10.7% compared with a month earlier. Building construction fell 12.5% and civil engineering slipped 7.5% from the month earlier.
For the first 11 months of 2009, construction output declined 13.8% compared to the same period of 2008. Building construction was 18.6% weaker and civil engineering was down 2.8%.

 

 

 

Analysis and Forecast: Increasing Risk


Overall construction output in Bulgaria reached a three-year low in November, according to NSI’s preliminary data. The downward trend since July was no surprise since the building boom of 2007 and 2008 ran out of steam during the first half of 2009. In addition, the collapse of the real estate market and the ongoing economic downturn presented serious difficulties for builders.  

Residential real estate construction decreased substantially in 2009, hit hard by a nearly 70% decline in foreign direct investment. The losses in the residential sphere were partly compensated by public investment in infrastructure projects, power engineering, and other projects in big cities. The NSI data clearly shows that the slump in civil engineering, which includes public infrastructure projects, is not as serious as in building construction. However, civil engineering is a much smaller sector.

Bulgaria’s construction sector will probably continue to slow down in the first half of 2010 as foreign investors continue to withdraw from the real estate market. Many residential and non-residential construction projects are already frozen, especially in the largest cities. The ability of Bulgarian authorities to make proper use of EU funds will be very important for assuring more civil engineering projects, which could stabilize the construction sector in a time of crisis.