Warning signs of a downturn in Slovenia’s construction sector

Warning signs of a downturn in Slovenia’s construction sector
The number of building permits issued decreased in 2018: a sign that the growth trend in the construction sector could be reversed soon.
By Valentina Dimitrievska in Skopje August 13, 2019

The Slovenian construction sector posted growth in all areas in 2018 and 2017, but turnover has not yet returned to where it was in pre-crisis times ten years ago, the statistics office said on August 13.

According to the analysis, some indicators show that the growth trend will be reversed in the near future.

Construction was one of the sectors that was hit the most by the economic crisis ten years ago. While others sector such as industry, trade and services have already exceeded the pre-crisis turnover, construction is still far behind the growth recorded in other activities, the statistics office said.

The turnover in the construction industry reached €6bn in 2018, up from €4.4bn in 2013, but down from €8.4bn in 2008 (or by 30%).

The largest share of turnover (over 49%) was recorded in 2018 in specialized construction activity, followed by the construction of buildings with almost 30% and civil engineering with almost 21%.

Data on building permits showed that the trend of growth could be reversed in the near future, as the number of issued building permits has fallen in the last three years (in 2018 the number of issued building permits fell by 4% compared with 2016). The trend continues in 2019 as 10% fewer building permits were issued in the first half of 2019 than in the same period in 2018. 

The confidence indicator in construction (comprised of the overall order books and employment expectations) already indicates a further decline in this activity, as in the first six months of 2019 the indicator was constantly lower than the average of the previous year.

“If the number of enterprises registered in construction has already equalled that in pre-crisis times (in 2018 there were 19,220 enterprises registered in the construction sector), however we are still far behind (when comparing 2018 with 2008) in turnover (by almost a third) and in the number of persons employed (by almost a quarter),” said the statistics office. 

“At the expense of the small number of workers, labour productivity increased and amounted to €24,925 in 2018, exceeding the values before the economic crisis. A slightly different picture is presented by the data on issued building permits and the confidence indicator in construction, which can be used as a kind of predictor of the future situation — in these two cases, the growth trend has already turned downwards.”

In 2018 construction contributed almost 7% of the generated value added, amounting to almost 1.7bn. This share has been constantly slowly increasing since 2015. For comparison, in the period before the economic crisis hit in 2008, construction accounted for almost 11% of the total value added.

In 2018, there were 19,220 construction companies in Slovenia, almost the same number as in pre-crisis 2008.

A total of 67,582 persons were employed in the Slovenia’s construction sector up from 60,852 in 2013, but down from 89,766 in 2008.

The average monthly salary in the sector was €1,290 in 2018, up from €1,188 in 2013 and from €1,148 in 2008.

The average gross earnings in construction in 2018 were 23% lower from the Slovenian average.

In 2018, the value of construction put in place in comparison with 2017 increased by 20%, while the year before it was 17% higher y/y. 

Construction activity is often dependent on weather conditions, but in the past few years in most cases the highest growth has been observed in October and November, while the lowest was in January and February.