82 / 108
EUROPE AND CIS
Indeed, the effects of the pandemic have already
made their mark on many sectors of the UK
economy – the construction sector recorded its
biggest ever monthly decline on record, with the
main construction activity index showing activity
falling from 39.3 in March to 8.2 in April. 86% of
construction firms surveyed by IHS Markit reported
a drop in business, with roughly 75% noting longer
delivery times for materials and a shortage of safety
equipment, such as face masks and goggles.
Economics Director at IHS Markit, Tim Moore
stated: “A drop in construction activity of historic
proportions in April looks set to be followed by a
gradual reopening of sites in the coming weeks,
subject to strict reviews of safety measures.
However, the prospect of severe disruption across
the supply chain will continue over the longer-term
and widespread use of the government job
retention scheme has been needed to cushion the
impact on employment.”
Despite this gloomy prognosis, the government
has only recently recommitted to significant
infrastructure spending, including the £106 billion
HS2 rail project, which could be key to ensuring
the future of the sector.
Germany has been no exception when it
comes to experiencing the negative economic
consequences of COVID-19. Industrial output
fell by an historic 18% month-on-month in April,
marking the biggest decline since the Federal
Statistics Office began taking records in 1991.
Year on year, industrial output is down by more
than 25% (the 2008 recession peaked at around
20%), factory orders fell nearly 26% in April
(another record), and car sales in May this year
were half those recorded in 2019 with total car
production falling to levels not seen since 1975.
Despite this, the fundamentals of the German
economy remain unaffected and the country has
been exemplary in its handling of the pandemic.
Indeed, there are already signs of a gradual
recovery – the Deutsche Bundesbank announced
that: “Economic output is estimated to shrink by
7% in 2020, but in the next two years, real gross
domestic product (GDP) will then increase by
3 – 4% per year.”
Also, in contrast to many other countries,
Germany’s construction sector has been allowed
to continue with projects, despite the lockdown:
“We very much welcome the decree issued
[…] on the continuation of construction work
in building construction, road construction and
hydraulic engineering […] The continuation and
new tendering of infrastructure construction sites
is an essential pillar of the domestic economy,
which must be maintained”, said Reinhard Quast,
President of the Central Association of the German
Building Industry (ZDB). The country has also
recently announced a significant financial recovery
package, beginning with
€
130 billion of funding
for emergency measures aimed at softening and
shortening the inevitable recession.
France has agreed to cooperate with Germany
via the establishment of a
€
500 billion recovery
fund designed to help the countries hardest hit
by the pandemic to rebuild their economies. The
show of European unity comes after criticism
was directed at the EU for not doing enough to
support member states through the crisis. French
President, Emmanuel Macron commented on
the deal: “The crisis that we are experiencing is
unprecedented and it requires a response which
is efficient, collective and above all European […]
The virus does not know any borders and has
affected all of Europe.”
Like many other nations, France will enter a deep
recession in 2020 with the pandemic creating a
toxic cycle of reduced consumer demand, rising
unemployment and business closures. Analysts
from Focus Economics predict that France’s
economy will suffer a contraction of 9.2% in
2020. In order to offset some of the impact, the
government has been issuing major loans to key
players in various sectors, such as
€
7 billion for
France-KLM and
€
5 billion for Renault. On the
positive side, to a comparatively low reliance on
external trade, the country is expected to rebound
and return to growth of 6.4% in 2021.
Prior to the pandemic, Hungary had been one
of the most dynamic economies in Eastern Europe
with second-quarter GDP growing by 5.2% in
2019. Construction sector output growth of 20.9%
was recorded for the year, supported in part by EU
co-financed infrastructure schemes. According to
IHS Markit, general economic growth had been
supported by the country’s position as a transport
hub between Western Europe, Eastern Europe
and the Balkans as well as governmental policies
of investment-led growth and a drive towards full
employment.
Hungary’s economic scenario has, predictably,
worsened as a result of the pandemic. In March,
industrial output contracted at the fastest rate in a
decade and growth across other sectors, such as
retail, declined in the wake of lockdown measures.
At the time of writing, Focus Economics predicts
that Hungary will undergo a contraction of 4.3% in
2020 before bouncing back to growth of 4.7% in
2021.
Things had been somewhat less positive for
Russia, which had seen an average growth of just
1.1% in 2019, due to weak domestic demand for
goods and a weaker contribution from exported
goods. However, in a bizarre twist of fate, Russia’s
economy is likely better protected than most from
the impact of the pandemic. Having been relatively
isolated from much of the global economy for a
number of years, due to sanctions imposed after
80
World Cement
World Review 2020