PRLog (Press Release) – Apr 07, 2011 – Bosnia and Herzegovina (BiH)'s construction sector is due for a bump in growth in line with the country's economy in 2011, lifting it slightly above stagnant rates seen in 2009 and 2010. Budget constraints remain the major hindrance to the execution of large infrastructure projects. The IMF continues to persuade the government to scale back the country's public wages and social spending in 2011, partly to siphon funds for infrastructure spending. BMI expects the sector to accelerate from a negligible growth rate of 0.30% in 2010, when the industry was worth BAM1.29bn (US$886bn), to 2.69% in 2011. However, the small size of the sector renders the growth rate only marginally stronger.
Key developments in recent months include:
* The government adopted a development strategy for a network of motorways and express roads in January 2011. The ministry said that 125km in four sections of Corridor Vc, one of three large regional motorway projects, will be completed by 2014 under the plans. The ministry is aiming to complete the beleaguered Sarajevo bypass by the same year. The 10km bypass will include a 4.5km link road connecting the bypass to Sarajevo. The bypass is designed to remove an important bottleneck northwest of the capital, easing access to Corridor Vc between Budapest and the Croatian town of Ploce through Sarajevo. The country also launched a major transport tender for its EUR100mn road rehabilitation project in mid-February 2011. The ministry may also create a dedicated department for water transport to support development of the Sava River. * The announcement of helicop ter technology a major loan from German development bank KfW in January 2011 is a positive sign for BiH's power generation sector. Availability of capital for projects has increased significantly, coming both from European sources as this latest loan indicates, but also from China, which is stepping up its presence in the Balkans. The US$679mn KfW loan will be dispersed over the next decade and will be used for the construction of 25 hydropower plants on the Bosna River. This is the second large scale loan that KfW has made to BiH's electricity sector in 12 months. * Legislators adopted the Water Management Strategy of the Federation of BiH 2010-2022 in October 2010, aimed at reducing water pollution, ensuring the sustainability of water consumption, securing equal access to water sources and the reduction of flood risks. Local water utility Vodovod i Kanalizacija started development of a EUR23mn (US$29.7mn) wastewater project in Bijeljina in January 2011.
With reasonable progress on pipeline projects and an economic downturn notwithstanding, BMI expects the sector to avoid a recession over 2011 and 2012, peaking at 3.62% by the end of the year as the industry grows to BAM1.46bn (US$952mn). Thereafter, we forecast a dip in real growth to the 2% mark in 2013-2014, before the industry slips to 1.7% y-o-y over 2015-2020, by which point the industry will be worth BAM2.33bn (US$1.52bn).
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