Already at the beginning of this year, economists and financial experts predicted that 2020 would be challenging and economic growth would be slower. However, no one – even the most pessimistic economist – has any idea that the entire world economy will have to voluntarily “press the brake pedal to the floor” and almost stop in order to prevent the virus’s threat to public health and its survival. During these months, since the deadly virus has been fought, every sector of the economy has been struggling to survive. Most, including the construction industry, have managed to adapt in part to the new reality, but to say that life and work have returned to normal would be frustrating. Although there have been a number of positive developments, the second half of 2020 may be even more severe in construction than at the beginning of the year.
Assessing the construction situation from now on, there is a number of good news: the government has provided funding for a number of pending projects and instruments have been put in place to ‘warm up’ the economy to help reduce the negative impact of Covid-19 on the national economy and GDP. . Along with the stabilization of the market situation, private entrepreneurs and the real estate market have also developed. Work has begun on the development of projects for the reconstruction of the former Red Star factory building into an office building, and with the care of investors, the former VEF production building is awaiting its turn for renovation. The Ministry of Transport has also allocated significant funds to road construction, where it is planned to invest approximately 75 million euros by the end of the year. The feeling of this positive “vibration” in the operation of his company – “Velve” has received an order from Mārupe City Council for the construction of Jaunmārupe kindergarten. Work on the site is already in full swing, and this has been largely possible thanks to the financial support provided by the MEPRD.
At the same time, despite these seemingly positive developments, it is important to realize that the external conditions affecting the industry as a whole are less encouraging. The banking sector, which is the main financier of construction projects, is currently very critical of every investment in the real estate segment, especially if it is a potential investment in hotel business projects. The tourism industry is also recovering very slowly after a period of inactivity. In addition, the high degree of uncertainty about what the near future will bring has led to general caution on the part of customers and subscribers, as well as the country and society as a whole. Every logical thinker has accepted and is aware that Covid-19 has not retreated, it has not been defeated.
It is not known whether the number of people infected with the virus will not increase sharply in the autumn, when children are scheduled to return to school and more and more people will gather indoors, in offices, shops, theaters, gyms and strict requirements will be applied again. Current observations suggest that Latvia has been able to limit the spread of Covid-19 quite successfully. Entrepreneurs and citizens have regrouped to be able to work in the new conditions. However, there are significant risks that the virus outbreak may recur in autumn or winter. According to epidemiologists, there is a real possibility that the virus will make itself known again and again somewhere locally, and this risk is exacerbated by the opening of borders and the cross-border movement of people, which significantly reduces the virus’s ability to control it. The construction industry, like many others, must be prepared for such a turn of events. True, the positive thing is that together we have already gone through this cycle once and know how to act, how to organize work remotely, what orders to give to our employees and what to ask from suppliers, subcontractors.
On the other hand, the implementation of repeated restrictions at national level in the event of a second outbreak may not be as effective as it was in the first time. It can already be observed that the society is tired of precautionary measures, and it is only a matter of time before a part of the Latvian population massively begins to completely ignore them. Given that a number of large-scale construction projects are currently under way, despite the spread of the virus, the construction industry may experience a shortage of manpower in a context where the spread of the virus continues. Also, the second half of this year and the beginning of the new year could bring adjustments to the cost of construction materials, as the availability of construction materials decreases as construction volumes increase. And, aware of all the above, the situation in the construction industry no longer seems so rosy.
In order for the second half of 2020 in the construction sector not to be as severe as the “stars” promise, it is clear that there must be a clear short-term and long-term program for heating the economy on the part of the state (projects, targeted infrastructure investments). It would also be clearly useful to make changes in the tax system, increase the availability of special programs (loans and grants) to increase the competitiveness of entrepreneurs, and purposefully reduce the share of the shadow economy by operatively streamlining the functioning of the justice system. Companies and their employees must also be actively involved – be prepared to work in the e-environment, ensure the performance of administrative functions remotely, maintain employee involvement and a sense of belonging to the company, and use disinfectants on construction sites, especially during the cold and dark seasons. Every employer must be socially responsible and take precautions, act responsibly and require their employees to monitor their health, be healthy only in the workplace and have their health checked for any symptoms of illness. Only by ensuring that the above conditions are met, both the financial markets and the construction sector can alleviate the prevailing pessimism, caution and avoid an even greater economic downturn. For this to happen, everyone must be involved.
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