Belarusian Workers Leave the Construction Sector

The construction sector plays an important role in the Belarusian GDP.

The country has been experiencing an investment crisis for the second year. The flagships of the construction sector are firing people, while the real wages in the industry are not growing, writes the website banki24.by.

The construction sector occupies an important place in the Belarusian GDP. At the end of the first eight months of 2021, the share of construction was almost 5%. However, it was earlier close to 10%.

The reason for the significant drop in the construction sector is the reduction of added value in it. Thus, in January-August, the added value in the industry fell by 13.5% by 2020, which is the worst result among the promptly published positions.

If not for the slump in construction, Belarus' GDP growth could have been 0.8 p.p. higher - not about 3%, but 3.8%. In August, the picture remained unchanged: the construction sector took away about the same 0.8 p. p. from the GDP.

The investment depression is indicative of the problems. Over the past eight months, investment in fixed assets decreased by 8.1% against 2020. Over the same period in 2020, investment also did not grow but fell by 1.7%. Thus, investment in the economy has been declining for two years in a row.

In 2021, both the real volume of construction and installation works and the cost of machinery and equipment are falling. The first component of investment for eight months fell by 11.7%, the second - by 4.1%.

The state of the labour market in the construction sector is challenging for workers. Real wages have been falling by 2020 for seven months - from January to July.

Large and medium-sized companies in the industry are actively getting rid of "unnecessary" personnel. For seven months of 2021, the construction sector flagships fired 31.9 thousand people, hiring only 25.6 thousand. It means the net loss of personnel was 6.3 thousand people.

Revenues of the industry flagships for seven months increased in nominal terms by only 0.7% by 2020. Meanwhile, prices in construction rose 11.1% over the same period. It means the flagship companies' revenues have declined relative to last year.

The profits even in nominal terms collapsed by 8.2% by 2020. In other words, adjusted for price dynamics, the real profit sagged by more than 17%.

The average return on sales in the industry amounted to 9%. However, the median profitability in construction is almost twice lower. The fact is that based on the seven months' results, 24.7% of flagship companies had profitability below zero (they incurred sales losses), while another 37.6% showed profitability in the range of 0-5%.

Only 3.4% of the flagship companies had profitability of 20% or more, and only 1.7% of the companies had profitability of 30% or more. The average share of such companies in the economy was 8.7% and 4.3%, respectively.

The net profit of the flagships decreased by 12% in nominal terms (without adjustment for inflation). The share of loss-making companies on the final result jumped from 14.1% in 2020 to 24.9% in 2021, and their losses increased by 32.3%.

The total debt of the industry as of August 1 reached 7.580 billion BYN. As of the reporting date, the share of overdue liabilities was 11.5%.