Slowdown in construction will be short-lived, CSFB study says

The completion of Olympic projects will slow down the Greek construction sector this year and in 2005, investment bank Credit Suisse First Boston (CSFB) says in a recent study. The analysts believe, however, that the deceleration will not be sharp, as the development has already been priced in by the stock market. A rebound of the sector is considered possible in the second half of 2005. The study notes that investment in infrastructure in the countries hosting the Olympics has acquired much greater significance than in the past. The need for larger stadiums, improved facilities, transportation networks and security, as well as larger crowds of spectators have made the hosting of the Olympics an «infrastructure test,» quite like the physical effort of the athletes participating in the Games, it notes. CSFB says the cost of Olympic projects was around 3.6 billion euros (this has been significantly revised by the government), but the haste with which a large part of the preparations and infrastructure had to be concluded significantly increased the indirect costs, pushing up the total figure to around 20 billion euros. This, of course, led to a boom in the construction sector, especially in the Attica region, during the last few years. CSFB believes the slowdown in the construction sector is inevitable, noting that Barcelona and Sydney had similar experiences. The analysts argue larger countries which host Olympic Games find it easier to absorb the effects of the cycle of boom and subsequent slowdown in construction activity, if one is to judge by the experience of Los Angeles and Atlanta compared to Barcelona and Sydney. In the Greek case, CSFB expects a rather immediate and sudden decline, which will not be of long duration. European Union investment subsidies and the government’s commitment to expanding the transportation network are projected to return the construction sector onto a positive track within a short period of time. The adverse effect on the share prices of cement companies which enjoyed a buoyant pre-Olympics period, such as the Lafarge group’s Heracles, Titan and Italcementi’s Halyps, will only be limited, CSFB believes, but they will underperform the market. It rates Lafarge and Titan as «underweight» and Italcementi as «neutral.» The recovery will greatly depend on the government implementing its program for new projects.

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