Insight into Construction in Lithuania by the European Construction Sector Observatory

Published by Simon Hardiman

Productivity fell significantly in building construction (-64.9%) and civil engineering (-32.8%) between 2008 and 2010, due to the harsh economic climate following the crisis. Nevertheless, and despite a further dip in 2012, both indicators have been recovering since then, although they are still below the 2008 pre-crisis levels. The number of construction sector companies also decreased by 17.6% between 2008 and 2013, and employment fell by 25%. Profitability went down by 48.7% over the same period, to EUR 6.6 billion in 2013, with the gross operating surplus also declining by 30.2% to EUR 786 million.

The economic crisis led to a sharp decline in housing investment and house prices. The house price index fell by 35.1% between 2008 and 2010, subsequently picking up but remaining well below 2008 levels due to lower demand. The number of building permits for residential buildings also declined, remaining 13.9% below 2008 figures in 2015. Nevertheless, 5,707 new homes were completed in 2015, which is 28.1% more than were completed in 2014. Given the very limited supply of affordable rental housing, the government introduced the Municipal Social Housing Development Action Plan2015-2020 to support the construction and renovation of social housing units with a budget of EUR 58.7 million. The Law on Support for the Acquisition or Rental of Housing was also approved, providing part reimbursement of rental payments to tenants and up to 20% of mortgages payments to selected beneficiaries.

To boost investment in infrastructure, EUR 1.1 billion of Lithuania’s 2014-2020 EU funding will be dedicated to the development of transport infrastructure. In addition, the EUR 100 million Baltic Energy and Infrastructure Fund (BEIF) was set up in 2016 to finance energy and infrastructure projects. The EIB is also a key player and is financing the modernisation of the country’s railway network with a EUR 68 million loan to support the extension, renewal and electrification of several railway tracks. In addition, a EUR 50 million loan facility dedicated to Vilnius urban infrastructure was set up for road improvements, city centre rehabilitation and renovation of schools and kindergartens.

Lithuania also provides funding schemes to support energy efficiency improvements in buildings. One example is the Programme for the Renovation (Modernisation) of Multi-Apartment Houses. The programme is managed through theMulti-Apartment Building Modernisation Fund (DNMF), has a budget of EUR 74 million and provides soft loans. Another example is the Energy Efficiency Fund (ENEF) which has a budget of EUR 79.6 million and is funded by the ERDF. The ENEF provides loans for the renovation of central government buildings and guarantees for street lighting modernisation projects.

Various initiatives and strategies have also been introduced to develop digital construction technologies such as BIM. The Digital Construction Institution is a collaborative initiative between the Lithuanian Government and business and science communities. The institution is driven by industry and aims to develop a single digital construction development infrastructure in Lithuania and to integrate it into related international networks. One of the initial goals is to develop a centralised database to connect different construction object databases to create a systematic process for complete construction object information management to avoid any potential overlaps in the construction process.

The outlook for the Lithuanian construction sector is moderate, with growth forecast to achieve an annual average rate of 4.2% between 2016 and 2025. Transport infrastructure, housing renovation and non-residential construction are expected to be the main drivers of growth. However, limited public funds, moderate demand and the shortage of skilled building construction workers are potential obstacles to future growth.

The European Construction Sector Observatory is helping the construction value chain to confront the economic and social challenges that impact the construction industry. Through regular analysis and comparative assessments, the initiative aims to inform European policymakers and industry stakeholders on the market conditions and policy developments in the European construction sector. The key outputs of the Observatory include Country Fact Sheets that profile and analyse the construction sector in each Member State, Policy Fact Sheets on key sector-related policies in each Member State, and a series of Analytical Reports on the implementation of Construction 2020 Strategy objectives.

Visit the Observatory website to download analytical fact sheets and reports on Lithuania and other Member States, and gain insight into the European construction sector.

Moderated by : Nadège Rigaudeau

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