FORECAST REPORT SERBIA UNTIL 2018 This Forecast Report Was Written By

FORECAST REPORT SERBIA UNTIL 2018 This Forecast Report was written by

Beobuild CORE d.o.o, Serbian member institute of EECFA

Mr Dejan Krajinovic T: +381 64 269 2694 [email protected] www.beobuild.rs

Editor: EECFA Analytical approach and methodological background: Dr Aron Horvath – EECFA Research – ELTINGA Janos Gaspar – EECFA Research

www.eltinga.hu www.eecfa.com

SERBIA © EECFA 2016 SUMMER 208 210 _ Summary and forecast revision 213 _ Forecast table 1 | macro figures 214 _ Forecast table 2 | construction summary figures 215 _ Residential construction | graph 216 _ Residential model | graph 217 _ Residential construction | graph, text 223 _ Forecast table 3 | residential figures 224 _ Office construction | graph 225 _ Office construction | graph, text 228 _ Retail and wholesale construction | graph 229 _ Retail and wholesale construction | graph, text 231 _ Industrial and warehousing | graph 232 _ Industrial and warehousing | graph, text 235 _ Hotel construction | graph CONTENT 236 _ Hotel construction | graph, text 238 _ Health- and Education-related construction | graph 239 _ Health- and Education-related construction | graph, text 241 _ Forecast table 4 | non-residential figures 242 _ Road construction | graph, text 244 _ Railway construction | graph, text 246 _ Other transport related construction | graph, text 248 _ Energy, pipeline construction | graph, text 251 _ Public utility | graph, text 252 _ Other civil engineering | text 253 _ Forecast table 5 | civil engineering figures 254 _ Project data: Non-residental | table 262 _ Project data: Civil engineering | table

SERBIA © EECFA 2016 SUMMER 209 SERBIA content © EECFA 2016 SUMMER 13% of total construction 28% of total construction Renovation ratio* 14% Renovation ratio 37% (2015) (2015)

59% of total construction Renovation ratio 45% (2015)

Residential (at constant price) Non-Residential (at constant price) Civil engineering (at constant price) 2003 2018 2003 2018 2003 2018 *Renovation / Total Macro outlook until 2017 Population (20-29 age group) GDP Private consumption Industrial production Employment Income Financial conditions GREEN: POSITIVE GREY: NEUTRAL RED: NEGATIVE

SUMMARY wages and serious government expenditure drop, the SUMMARY economy was growing, and this should be just the 015 came to be the shifting year for most of the beginning. With investments on the rise, it seems all 2economic parameters in the country’s economy, macroeconomic forecasts can only be underestimated. AND FORECAST indicating better days on the horizon. It was the year of economic recovery after a terrible flood disaster that hit With the better-than-expected results in the fiscal the mining industry, devastating industrial production consolidation and the renewed economic growth, REVISION and hurting agricultural output. As figures slowly the government increased public investments and recovered the lost ground from the disaster in 2014, started easing fiscal policies. In H2 2015 several new most economic indicators started accelerating in H2 investment programs were announced that will help 2015. The budgetary consolidation was a success and significantly increase bottoming construction values. between 2013 and 2016 budgetary deficit decreased Construction outputs stabilized in 2014 and returned to just 3.5%, while the re-industrialization is taking to growth in 2015, but then another very important swing. Combined measures in industrial policy, with reform came. The government implemented reformed the restart of the state-owned chemical complexes in permit procedures, making the acquiring process Pancevo and Kikinda, and the recent privatization of much shorter and cheaper. Combined effects of the the steel mill in Smederevo, industrial production is economic recovery and administrative permit reform booming and GDP went up by 3.5% in Q1 2016 against secured very decent outlooks in the forecast period, the same period in 2015. This meant that in spite of with a particularly strong recovery of non-residential the austerity program that brought linear cuts in and civil engineering construction.

210 SERBIA SUMMARY AND FORECAST REVISION © EECFA 2016 SUMMER Current forecast Previous forecast

Residential (index 2012 = 100) Non-Residential (index 2012 = 100) Civil engineering (index 2012 = 100) 2012 2015 2018 2012 2015 2018 2012 2015 2018

Even residential segment will go back to black territory in austerity. With road construction volumes already after a strong contraction in previous years. What standing high and bigger railway projects to start, SUMMARY makes this recovery sustainable is the fact that all the construction of new power plant will push energy financial factors are improving, including employment, segment also to break new records in the forecast wages, retail turnover and lending for homebuyers. period. Civil engineering maintains to be the largest AND FORECAST The permit reform also helps boost multi-unit figures area of construction. 2015, so now the new investment cycle is also taking charge. With positive developments on both demand FORECAST REVISION REVISION and offer side of the market, this segment is entering new dynamics. ost of the forecast revision changes went on Mimproving projections of almost all segments, The non-residential segment is booming under effects with their better-than-expected performance. The of the permit reforms, and increased public and changes came with increased activity and certain private investments. The booming cycle is already in administrative reforms in the permit procedure that place for most major sub-segments, including hotels, pushed practically the entire construction industry commercial and industrial buildings, but other also a notch higher than what was previously anticipated. reaching near record high volumes. These positive developments most notably improved projections in building construction, but also further The booming cycle for civil-engineering is already boosted already performing civil engineering outputs. underway, with large road projects helping mend some The outlook for the subsectors across the board is of the consequences from decreased expenditures much better, as the Serbian economy has secured

SERBIA SUMMARY AND FORECAST REVISION © EECFA 2016 SUMMER 211 SERBIA SUMMARY AND FORECAST REVISION © EECFA 2016 SUMMER a very dynamic growth in the forecast period and has forced an upward revision of almost all sub- SUMMARY financial conditions started showing shifting trends. segments, particularly industrial, commercial and hotel construction, where record output volumes are Residential construction, like other building construction, expected in the forecasted period. Even more, the AND FORECAST has been revised upward, with growth now visible in economic recovery and the successful consolidation both one-family houses and multi-unit buildings. The of public finances are finally announcing a new growth much faster than expected recovery of employment for public building construction, including education, REVISION and earning figures could push residential construction health, culture and sport facilities. into a positive territory. Although we forecast volumes close to previous year levels, it will slightly go up after Civil engineering is also maintaining its positive outlook several years of contraction. With the permit reform and a historically very good performance is awaited to and increased investments, home construction is defi- unfold. The subsector took most of the growth in 2015, nitely on the recovery path and we predict for overall and the revision confirmed an even larger scale. Better- growth rates to rise in the forecast period. than-expected results came in road construction, but also other bigger sub-segments like energy and In the non-residential segment there has been a real and other transport infrastructure. All this produced very visible impact of the reformed permit procedures. extensive growth rates that revised output projections With many investors anticipating the administrative to double-digit growth rates in 2015 and 2016. The reform, after the implementation of new laws, the forecast period remains on the performing side, with rise in permits has been very conspicuous. This record output values in most segments till 2018.

212 SERBIA SUMMARY AND FORECAST REVISION © EECFA 2016 SUMMER FORECAST TABLE 1

SERBIA

MACRO CONDITIONS AND DEVELOPMENTS 2008 2009 2010 2011 2012 2013 2014 2015 2016(F) 2017(F) 2018(F)

POPULATION (´000) 7 350 7 321 7 291 7 186 7 146 7 115 7 085 7 060 7 041 7 023 7 010

POPULATION AGE GROUP 20-29 YEAR (´000) 1 004 992 978 920 910 900 895 880 865 852 840

GDP GROWTH (%) 5.4 -3.1 0.6 1.4 -1.0 2.6 -1.8 0.7 2.3 3.2 3.5

PRIVATE CONSUMPTION GROWTH (%) 6.6 -2.4 -0.6 -0.9 -2.1 -0.4 -1.3 0.6 1.9 2.5 4.0

RETAIL TURNOVER (%) 5.9 -12.3 -0.9 -16.7 -6.2 -5.1 2.0 1.8 8.5 9.0 8.0

INDUSTRIAL PRODUCTION (%) 1.4 -12.6 1.2 2.5 -2.2 6.0 -6.5 8.2 8.0 7.5 7.0

EMPLOYMENT (´000) 2 082 1 985 1 901 1 866 1 865 1 864 1 845 1 996 2 005 2 020 2 045

REAL WAGE GROWTH (%) 3.9 0.2 0.7 0.2 1.1 -1.5 -1.5 -2.1 2.5 3.0 4.0

CONSUMER PRICE INDEX (%) 11.7 8.4 6.5 11.0 7.8 7.8 2.9 1.9 2.0 2.5 3.0

INTEREST RATE ON NEW HOUSING LOANS (% P.A.) 7.4 8.1 5.4 5.0 5.7 5.0 4.9 3.8 3.7 3.7 3.5

1 EUR IN RSD 81.4 94.0 103.0 102.0 113.1 113.1 117.3 120.7 122.1 123.5 123.8

SERBIA SUMMARY AND FORECAST REVISION © EECFA 2016 SUMMER 213 SERBIA FORECAST TABLE 1 © EECFA 2016 SUMMER 33% of building construction FORECAST TABLE 2 is residential (2015)

VALUE VALUE GROWTH RATES AT CONSTANT PRICE (%) SERBIA (RSD MLN) (EUR MLN) CONSTRUCTION MARKET SIZE 2015 2015 2008 2009 2010 2011 2012 2013 2014 2015 2016(F) 2017(F) 2018(F) RSD 70bln RSD 70bln AND DEVELOPMENT Residential output (at 2015 price) NEW 27 339 226 -5.3 -6.0 -9.0 -11.6 3.9 -28.6 -13.0 6.9 18.2 15.6 12.7 RESIDENTIAL RENOVATION 4 414 37 -20.6 -15.7 1.7 -16.9 -9.0 -18.9 -4.1 1.2 9.9 17.4 21.4 TOTAL 31 753 263 -7.8 -7.4 -7.6 -12.3 2.2 -27.5 -11.8 6.1 17.0 15.8 13.9 RSD 60bln RSD 60bln NEW 41 179 341 26.9 -18.5 -24.9 27.4 4.1 -22.4 15.1 10.3 13.9 16.0 7.6 NON-RESIDENTIAL RENOVATION 24 600 204 -7.4 -18.1 -8.8 39.7 -9.4 -11.3 -15.4 16.5 9.6 6.8 9.6 Long-term trend estimation TOTAL 65 778 545 11.7 -18.3 -19.0 32.5 -1.8 -18.0 1.8 12.5 12.3 12.6 8.3 RSD 50bln RSD 50bln Forecast NEW 68 518 568 8.3 -12.2 -16.3 4.5 4.0 -25.5 1.8 8.9 15.6 15.8 9.7 BUILDING RENOVATION 29 013 240 -10.7 -17.6 -6.4 25.6 -9.3 -12.6 -13.7 13.9 9.7 8.4 11.6 CONSTRUCTION TOTAL 97 531 808 2.4 -13.6 -13.8 10.4 -0.2 -21.8 -3.2 10.3 13.8 13.7 10.2 RSD 40bln RSD 40bln NEW 76 588 634 25.7 -21.1 1.5 52.8 0.2 -0.9 2.8 16.0 10.8 9.3 0.8 CIVIL ENGINEERING RENOVATION 62 663 519 -9.3 -25.4 1.2 5.1 0.2 -35.9 10.9 22.4 10.8 13.8 2.8 TOTAL 139 251 1 153 1.1 -23.8 1.3 23.3 0.2 -19.3 6.2 18.8 10.8 11.4 1.7 32 RSD 30bln (RSD bln) RSD 30bln TOTAL CONSTRUCTION OUTPUT 236 782 1 961 1.7 -18.7 -6.7 17.0 0.0 -20.5 1.9 15.2 12.1 12.3 5.3 263 (EUR mln)

RSD 20bln RSD 20bln

214 SERBIA FORECAST TABLE 2 © EECFA 2016 SUMMER 33% of building construction RESIDENTIAL CONSTRUCTION is residential (2015)

RSD 70bln RSD 70bln Residential output (at 2015 price)

RSD 60bln RSD 60bln

Long-term trend estimation RSD 50bln RSD 50bln Forecast

RSD 40bln RSD 40bln

32 RSD 30bln (RSD bln) RSD 30bln 263 (EUR mln)

RSD 20bln RSD 20bln

24% 14% 8% -6% 0% -8% -7% -8% -12% 2% -27% -12% 6% 17% 16% 14% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

215 SERBIA ResidentIal Construction © EECFA 2016 SUMMER RSD 80bln RSD 80bln RESIDENTIAL IN THE LONGER RUN WE THINK THAT OUTPUT TENDS TO DIRECT TOWARDS ITS LONG-TERM TREND (THE GRAPH ON THE BOTTOM RIGHT CORNER), RSD 70bln DEFINED BY INCOME AND DEMOGRAPHIC TRENDS. IF THEY PLAY A HUGE ROLE, RSD 70bln MODEL GOVERNMENTAL INTERVENTIONS ARE ALSO CONSIDERED.

RSD 60bln RSD 60bln THE MODEL SUGGESTIONS ARE EVALUATED BY THE NATIONAL RESEARCHER TAKING INTO CONSIDERATION INTRA-YEAR FIGURES LIKE PERMIT, COMPLETION, PRODUCTION INDEX, REGULATORY CHANGES, ETC. SHORT TERM FIGURES ARE SET SO. RSD 50bln DOTTED LINES SHOW WHAT THE RSD 50bln MODEL WOULD HAVE SUGGESTED ABOUT THE NEXT 3 YEARS

RSD 40bln RSD 40bln

RSD 30bln RSD 30bln

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 INDICATORS CONSIDERED BY THE MODEL

12 4%

2003 2015 2003 2015 2003 2018 2003 2018 PERMIT (NUMBER OF HOMES) PROFIT MARGIN (HOME PRICE/CONSTRUCTION COST) INTEREST RATE ON HOUSING LOANS COMBINED TREND OF DEMOGRAPHY AND INCOME Permit recovered in 2015 and this trend continued In 2015 costs went up by 2% and continued Interest rates continue to fall year after year, reaching While the demography continuing to burden the in Q1 2016. With economic stabilization, improved decelerating in 2016 following general deflationary average levels of 3.79% in 2015. This is already outlook, income indicators are finally recovering in financial conditions, permits are announcing a pressures. At the same time, this helped improve producing boost in new loans, with 50% growth in 2016. The sustained improvement in finances and sustained recovery of home construction. profit margins further as home prices rose by 3.5%. 2015 and another 21% rise in Q1 2016. employment could help stabilize demography.

216 SERBIA Residential model © EECFA 2016 SUMMER tal numb To er of d weli ngs

11 gs ildin 1 dwelling bu

2 Completion ('000 dwellings) 2003 2015 2018

fter several years of negative developments and an all-encompassing recovery. With a significant RESIDENTIAL Ain the residential segment, the construction of construction boost of new multi-unit buildings, it is homes started its recovery path in 2015. Residential certain that this cycle will produce sustained double- construction has been one of the worst performers digit growth of construction volumes in the forecast CONSTRUCTION during the previous years. The value of residential period. construction had practically been contracting since 2008, and during the period it lost almost 60% of its The recovery of market conditions is one of the major value, from nearly EUR 500 million in 2008 to just factors influencing overall results in the residential over EUR 200 million in 2014. The situation began to segment. After the bubble burst in 2008/2009, the recover in 2015, largely by the general macroeconomic Serbian residential market had been struggling for betterment, but also due to the reform of permit years, trying to stabilize at new levels. It practically procedures and new investments in the sector. A hit rock bottom in 2014, still waiting for the economic strong growth is recorded now in the one-family house shift to provide improving market conditions. With segment as well as multi-unit building construction. economic reforms underway since 2013, the positive dividends started delivering in 2015 and the The first signs of recovery came in H2 2015 as seen economy is on a growth path despite the ongoing in permit figures, but the very negative results in fiscal consolidation and the Government’s austerity H1 held down the 2015 results, keeping them only measures. Accelerating economic growth, together in a mild positive territory. The very strong permit with a very successful reform of permit procedures figures continued in Q1 2016, confirming a sustained

SERBIA Residential model © EECFA 2016 SUMMER 217 SERBIA Residential construction © EECFA 2016 SUMMER is already producing impressive recovery figures and addition, since January 2016 the Government started very positive outlooks. issuing electronic building permits; a next step in the process of making procedures efficient, cheap and Permits have been the first to announce recovery in transparent. The results of the applied reform started H1 2015, initially by the one-family house segment showing almost immediately, as private investments followed by multi-unit buildings in H2 2015. The surged in practically all segments of construction performance of multi-unit buildings is extremely industry. Positive effects of the permit reform will important in this market, as it makes up more than be visible not only in increased investments levels, 60% of total construction output in residential segment. but also attempts of curbing illegal construction and With such an intensive growth of multi-unit buildings, growth of illegal stock, estimated to currently stand at it is also to expect a significant effect on the level 1.5 million buildings. of new constructions. Unlike in previous recession years, when renovation figures gained share in output The permit recovery came slowly during the entire volumes, in the forecasted period we will see a move 2015, as different parameters were ripping benefits of towards new constructions. The performance of new the new market situation. As a matter a fact, recovery constructions is essential for the whole segment in permit figures in H2 2015 and what the figures are RESIDENTIAL performance, as new buildings make around 80% showing in Q1 2016 are much more than expected. The of the yearly volumes in Serbia. Not only will it grow recovery first came from renovation and permits from volumes, but we expect it to further increase its share one-family houses in H1 2015, while new constructions CONSTRUCTION in the forecast period. and multi-unit buildings followed suit in H2. This level of new private investments in the residential segment PERMITS overpasses expectations, and 2016 figures are just confirming the strong recovery of practically all Permits were first to note changes in the market, a long parameters. awaited recovery after years of negative performance and contraction. The recovery was initially organic, During H1 2015, the number of permitted homes driven by economic stabilization and better financial stagnated at the previous year’s levels, but the shift conditions in the market. In Q2 2015 began the came in H2. Being on historically very low levels in implementation of the new permit procedures and 2014, the number of issued permits in H2 2015 boomed new building regulations that follow, unblocking against the same period of the previous year. The one of the major breaks on the country’s economic number of permitted homes hiked by an amazing 62% development. Long and expensive permit procedures in H2 2015 compared to H2 2014. When expressed in were completely overhauled; and with new integrated square meters, this spike was even higher, standing system of institutional accordance, it takes no more 76% higher than in the previous year. If we analyze than a couple of weeks to acquire a building permit. In H2 2015 data by type of constructions, the number of

218 SERBIA Residential construction © EECFA 2016 SUMMER one-family homes went up 28%, while the number of selling price is slowly recovering with 3.4% growth in permitted homes in multi-unit buildings recorded a the first three months of 2016. 106% growth against H1 2014. This boost in permitted square meters in multi-unit buildings increased the The number of home transactions has also been share of this type of constructions to 73% of the total decreasing for several years, but this trend should permitted space in 2015. be broken in 2016, for the first time. After another decrease of 6.3% in 2015, the recovery started in This trend from H2 2015 continued in 2016, as the H2 2015 and continued in Q1 2016. The number of number of permitted homes in Q1 grew 25% against transactions in Q1 2016 grew 23% against same the same quarter in 2015. When we express these quarter in 2015. It is important to note that statistical homes in square meters the increase stands 50% coverage of transaction numbers is very relative and higher than in Q1 2015. This is particularly caused only covers the market partially. Only consolidated by significant share of permitted homes in multi-unit transaction figures come from The National Mortgage buildings during Q1 2016. Corporation, it helps formulate general trends and developments. CONSTRUCTION COSTS, PRICES RESIDENTIAL FINANCIAL CONDITIONS (MORTGAGE, EARNINGS, There are powerful deflationary forces pushing down INTEREST RATE) both prices and costs in construction. The increase in CONSTRUCTION construction costs has been decelerating for the last Financial conditions were one of the main factors 5 years, and in 2015 it grew by 1.9% against 2014. This influencing growth in previous years. Economic slowdown of construction costs continued in 2016 as problems in developed countries led to serious drops well, with even negative dipping at times. It is expected in investments and tightening of financial conditions. for construction costs to rise just above 1% in 2016, With declining exports and rising public debt, Serbia but with tendency to increase growth rates in the was on the verge of bankruptcy in 2012/13, which forecasted period. The cost of new home construction caused significant political and economic changes, went up by 3.5% in 2015, largely because of the hike including budgetary consolidation program, new on the Belgrade market - while many other cities economic policies and an administrative reform. decreased costs in the same year. Serbia entered the austerity program in 2013 with 10% linear pay-cuts for public servants and pensions, but The other side of the medallion is the average selling this measure was partially removed in 2015. home price, which lost quite of its value during the economic downturn. This negative trend continued It can be said that the consolidation program was in 2015 with 3.3% drop against 2014 values. What is successful, with budgetary deficits slashed from the good news for the profit margins is that average 7.5% to just 3.5% of GDP in two years, while achieving

SERBIA Residential construction © EECFA 2016 SUMMER 219 SERBIA Residential construction © EECFA 2016 SUMMER economic growth at the same time. Not only budgetary half of their values till 2015. The number of completed deficits are diminishing, but unemployment fell and homes in 2015 reached just 11.000 units, staying real wages are growing again. After three consecutive practically flat on the previous year. This negative years of contraction in earnings, finally there is streak will most certainly change in 2016 and grow positive development coming. The real wage started even further in 2017 and 2018. recovering in late 2015, and continued the trend in 2016 with 3% growth in the first quarter. Initially it is expected that one-family houses will first start recovering, with ongoing multi-unit projects There is significant potential of the Serbian market, following suit in 2017 and 2018. One-family houses with only around 90.000 mortgages in totalling around have already seen an increase in completion numbers EUR 2.6 billion. On the other hand, interest rates on starting in 2014. Although completion of one-family housing loans were standing at historically low rate houses was falling in numbers, when expressed in of 3.79% in 2015. Interest rates on housing loans went completed square meters it actually grew. This positive down each year, as the only positive consequence of sign announced the end of the downward trends and the economic crisis. With borrowing much cheaper, with the current hike in permits and investments; the it seems that new buyers are finally emerging with number of completed homes should recover to around RESIDENTIAL new credit positions. 2015 recorded the first growth 14.000 units by the end of the forecast period. 2015 of newly issued housing loans since 2011, increasing completion figures are set to largely maintain levels, by 50% against 2014 figures. This trend has continued with the possibility of a small negative correction. The CONSTRUCTION into Q1 2016 with 21% growth against the same quarter real boost should come from planned and ongoing in 2015. multi-unit projects, which usually include above 70% of completed units. After several years of economic struggle, financial conditions are now on a stable upward path. Most LABOUR MARKET, DEMOGRAPHIC TRENDS, STOCK parameters are now showing better than expected results. Serbia has secured a potent economic growth It seems that the worst is over as far as the number in the coming years, so it is expected for financial of unemployed people is concerned. What has been indicators to continue improving throughout the one of the most pressuring aspects of the economic forecast period. crisis and burning social problems exploded from 14% in 2008 to a staggering 24% in 2012. Unemployment COMPLETION rate reached an absolute all-time record and became one of the triggers for political and economic changes Completion is yet to see better days as rising outputs that followed. Already in H2 2013, the number of filter into completed units in 2016 and beyond. The unemployed started decreasing, and this trend still levels of completion fell every year since 2008, losing continues in 2016. What is even more significant, in

220 SERBIA Residential construction © EECFA 2016 SUMMER 2015 the number of employed people also started the low birth rate could be adopted. This new law will rising again, after 16 years of economic transition. In aim at arranging a number of benefits for families Q4 2015, the number of unemployed people dropped with children. Of course, lower unemployment rate to 17.7% and this trend is expected to continue in the and better economic conditions are a foundation of the forecast period. In Q1 2016, the Serbian economy eventual change in demographic trends. created 10.000 new jobs confirming the continuation of the pace. Unemployment rate is set to drop to around Migrations make the critical element of demographic 13% till 2018. changes in Serbia. Except the migration of local population towards developed economies, there is a The labour reform in 2014 also helped the better powerful migration process on the internal plan as well. performance of the labour market with more changes It affects internal distribution of the population, from towards flexible workforce, but also substantial state villages and smaller towns towards big cities. Almost funds subsidizing investments opening new jobs. As all bigger towns in Serbia benefited this process by the Development Agency of Serbia reports, during increasing population, particularly Belgrade that the last 10 years, the Serbian government spent EUR takes most of the regional migrations. The population 400 million subsidizing new jobs, thus creating some of Belgrade increased around 10.000 each year during RESIDENTIAL 57.000 new jobs. Together with this, the Government the last decade, while, on the other hand, smaller announced the continuation of the fight against very towns struggle to keep their young population and large gray segment of the economy. Although the gray many smaller and remote villages are left completely CONSTRUCTION sector has been decreasing in last couple of years, abandoned. even with increased effort, it still amounts close to 25% of the total economic output. The acceleration of The stock of homes in Serbia had an explosive growth economic growth in the coming years will bring even during the last decade, where statistics covered more dynamism to the labour market, helping realise the average construction of around 20.000 units per its positive outlooks. year; but the 2011 census showed a stock increase of over 30.000 a year. Between 2001 and 2011, the Demography is still a major social issue and slowly stock increased from 2.8 to 3.2 million units. While tends to grow into prime economic and national illegal and unpermitted construction was tolerated in issue in the coming years, particularly as society previous years, the real boost came from the initiation becomes more aware of the serious consequences. of the first credits for homebuyers. This boom did not During the last 15 years, Serbia lost more than last long as the economic crisis spilled over Serbia, 500.000 inhabitants on both negative birth rate and causing a practical halt in the market and some of the immigration. Unfortunately, this issue has not been lowest outputs ever recorded. The stock will continue tackled in previous years, but there are signs that 2016 to grow, but at a much weaker pace than in the previous will be the year when the first legal policy concerning decade.

SERBIA Residential construction © EECFA 2016 SUMMER 221 SERBIA Residential construction © EECFA 2016 SUMMER GOVERNMENT PROGRAMS, SUBSIDIES, intervened by constructing 4.000 affordable units for REGULATIONS the middle-market.

During the financial consolidation that started in 2013, There is also an active segment of social housing, but all government programs supporting residential operates on a small scale. By the beginning of 2017 construction were cancelled. Paired with a deepening should start public investment of the local council in RESIDENTIAL economic and financial situation, it was one of the Belgrade that prepares construction of 270 homes for main reasons for such a significant crash in outputs refugees, with another 70 social units to be constructed during 2013. There were various residential programs in southern city of Nis this year. CONSTRUCTION supporting first-time buyers, interest rate subsidies and even state residential construction for the market. What could be the great potential for the mortgage As the budget consolidation came successful, there market is the legalisation process for the unpermitted are first signs to have new incentives in the forecasted residential construction. If the illegal property fits the period. urban and spatial plans, there is a possibility of fast- tracked legalisation, which could give another boost The new programmes should initially support only the for the residential market. The legal framework has prime need of the public service. So, 2016 saw the many times been changed, but never really achieved start of a new program of subsidized interest rate for the desired results. A new law tackling illegal military personnel valuing around EUR 4 million, but construction was adopted in late 2015, and it is still to also the announcement of new residential construction be seen what results it will give. The implementation of for the market. The Building directorate of Serbia is the new law started in January 2016 and so far there preparing to invest in construction of new residential has been an encouraging number of applicants. There estates with 1.100 homes in Belgrade’s Zemun district. is an estimated number of around 1.5 million illegal This will be the first state investment in residential buildings in Serbia, of which 1.2 million are illegal and construction since 2011, when the government unpermitted homes.

222 SERBIA Residential construction © EECFA 2016 SUMMER FORECAST TABLE 3

SERBIA

RESIDENTIAL CONSTRUCTION 2008 2009 2010 2011 2012 2013 2014 2015 2016(F) 2017(F) 2018(F)

1 DWELLING BUILDINGS 6.8 3.8 4.2 3.3 2.8 2.1 2.0 2.0 2.2 2.5 3.0 COMPLETED DWELLINGS 2+ DWELLING BUILDINGS 13.0 15.3 14.4 15.1 12.4 11.4 9.1 9.0 9.4 10.3 11.0 (´000 UNIT) TOTAL 19.8 19.1 18.6 18.4 15.2 13.5 11.1 11.1 11.6 12.8 13.9

1 ROOM 4.6 5.6 5.2 5.4 4.4 3.3 2.3 2.3 2.4 2.7 2.9

2 ROOM 5.7 5.6 6.0 6.5 6.2 5.6 4.0 4.0 4.3 4.9 5.4 COMPLETED DWELLINGS (´000 UNIT) 3+ ROOM 9.6 7.9 7.4 6.6 4.7 4.5 4.8 4.8 4.9 5.2 5.6

TOTAL 19.8 19.1 18.6 18.4 15.2 13.5 11.1 11.1 11.6 12.8 13.9

CONSTRUCTION PERMITS (´000 DWELLINGS) 17.8 15.2 12.4 13.5 12.4 8.9 8.9 11.6 12.5 12.9 13.6

RESIDENTIAL STOCK (MILLION DWELLINGS) 3.14 3.18 2.88 2.90 3.23 3.28 3.29 3.31 3.31 3.32 3.32

HOME OWNERSHIP RATE (%) 87.5

SERBIA Residential construction © EECFA 2016 SUMMER 223 SERBIA FORECAST TABLE 3 © EECFA 2016 SUMMER 14% of building construction OFFICE CONSTRUCTION is oce (2015)

RSD 25bln RSD 25bln

) e ic r p 5 1 0 2 t (a t RSD 20bln u RSD 20bln tp u o Long-term trend estimation ce O

RSD 15bln Forecast RSD 15bln 13 (RSD bln) 111 RSD 10bln (EUR mln) RSD 10bln

RSD 5bln RSD 5bln

RSD 0bln RSD 0bln

55% 128%21% 16%45% 104%33% 30%5% 34%10% -16%48% -34%49% 27%12% -24%-1% -33%-14% -16%-19% 21%-3% 10%3% 5%8% 15%5% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

224 SERBIA office construction © EECFA 2016 SUMMER 14% of building construction is oce (2015)

RSD 25bln RSD 25bln 164

) e 108 ic r p 5 1 2 0 Permit and completion ('000 m ) 2 t 2003 2015 (a t Completion Permit RSD 20bln u RSD 20bln tp u o Long-term trend estimation ce O

RSD 15bln Forecast RSD 15bln he office segment has been on a very long downward square meters. The first signs of recovery came slowly 13 OFFICE Ttrend with being one of the worst performers in the at the end of 2014, but the real boost came in 2015 as (RSD bln) non-residential category. What was a segment with bigger office projects entered realization in Belgrade. volumes of EUR 265 million in 2008 came to realize Investors were quick to react to growth in demand, 111 just EUR 93 million in 2014. The reason for the colossal and in 2015 permit numbers were already confirming RSD 10bln (EUR mln) RSD 10bln CONSTRUCTION drop was largely produced by the very difficult financial the new investment cycle. The number of permits in conditions combined with the dire lack of investments. office space grew 32% in 2015 against 2014, and when Consequentially, after several years of decrease in expressed in square meters, this rate was even more outputs, the office market was already strained and impressive with a 102% growth. Although the number RSD 5bln RSD 5bln unable to take up any serious demand. The growth of of permits fell in Q1 2016, permitted square meters take-up and stronger demand, particularly in 2014 and continue to surge strongly, standing 38% higher 2015, decreased vacancy levels from 18% in 2010 to against Q1 2015. just 5% in 2015. This market development created a good investment opportunity, so the new investment Beside the favourable market situation, growth in RSD 0bln RSD 0bln cycle is underway and will provide stable growth of this segment is being additionally driven by boom in output volumes and stock in the coming period. industrial construction that usually includes related office capacities. Increased investments should The performance of the office segment was completely produce formidable growth in stock, expected to relying on small, often industrial projects, so permitted increase 20% by end 2017. Take-up made strong gains space had even larger losses when expressed in throughout 2015, hitting record take-up value in the

2016 2017 2018 Main ongoing and planned Oce projects

last quarter. With 30.000 sq/m of leased office space the construction of another office complex in Belgrade OFFICE in Q4 2015, it doubled the average quarterly leasing totalling at 40.000 sq/m. During 2015, they completed activity from 2014. The continuous strong take-up the first building of the complex holding 14.000 sq/m on the market shows the sustained demand that will and the construction of the second one is underway CONSTRUCTION provide good conditions for further growth. with 10.500 sq/m to be ready by the end of this year. Additionally, at the end of 2015 the construction of In 2015 most bigger A-class office projects in Belgrade Sirius complex in Belgrade also started – two office entered the first phase of realization. Since demand is buildings on 45.000 sq/m. outpacing offer on the market, most of the new office square meters are leased up-front, which means that The pipeline in office segment also holds several bigger projects should increase stock, but should projects, including Galens centre (combined purpose not significantly affect the vacancy rate. Most of the complex in Novi Sad with around 20.000 sq/m of investors in this investment cycle are already existing office space), and Delta Holding HQ (20.000 sq/m players on the market expanding their portfolio. Among planned to start in 2016 in Belgrade), and “Sky Plaza” the most important projects, we would highlight the (another combined purpose complex getting closer to expansion of Belgrade’s largest office park by the realization). This latter is a towering complex will hold construction of 4 new buildings totalling at 80.000 sq/m. commercial and office facilities totalling at around The investor AFI Europe completed the first building 100.000 sq/m. The demolition of the existing building with 20.000 sq/m in 2015, while another one with the and the clearing of the plot should begin by the end of same size is due in 2016. Warsaw-based GTC initiated 2016.

226 SERBIA Office Construction © EECFA 2016 SUMMER Although the stock increased in previous years, the become even more attractive and a stronger support OFFICE growth rate was slow and insufficient. The stock for renovation figures in the future. With missing practically stagnated for two years in 2013 and 2014, new projects in previous years, renovation outputs but the numbers will start going up as ongoing projects surpassed new constructions with a 58% share of CONSTRUCTION reach completion. Then a somewhat stronger growth the total office outputs in 2014. This positive ratio for of stock followed after a while, with 23.000 sq/m added renovations will not sustain as new constructions in 2015. As a consequence of hiked investments, the come back in 2015, but the value of renovation works stock should grow further in 2016 and is expected to will continue to grow over the forecast period. add nearly 50.000 sq/m. At the end of 2015, total stock of office space amounted to 761.000 sq/m.

In previous years renovation was a much better performer than new constructions in the office segment. During the last seven years new constructions lost 67% of their output values, while renovation figures cumulatively lost just 17%. A move towards renovation was caused by the lack of new projects, but also the untapped stock of 30 or 40 years old facilities. The utilization of this substantially older stock can also

SERBIA Office Construction © EECFA 2016 SUMMER 227 SERBIA Office Construction © EECFA 2016 SUMMER 10% of building construction RETAIL AND WHOLESALE CONSTRUCTION is commercial (2015)

RSD 16bln RSD 16bln Forecast

C o m m e r c ia l Long-term trend estimation RSD 12bln o RSD 12bln u tp u t (a t 2 0 1 10 5 p (RSD bln) r ic e ) RSD 8bln 84 RSD 8bln (EUR mln)

RSD 4bln RSD 4bln

RSD 0bln RSD 0bln

-40% 105%21% 52%45% 104%-3% 0%5% 34%10% -33%48% -36%49% 12%4% -24%49% -14%26% -37%-19% 29%-3% 26%3% 16%8% 18%15% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

228 SERBIA Retail and wholesale construction © EECFA 2016 SUMMER 10% of building construction is commercial (2015) 308

161 permit procedures started to be implemented. With RSD 16bln RSD 16bln wages growing, retail trade in swing and reformed Forecast permit laws, the expansion of the retail segment could only be underestimated. Permit and completion ('000 m2) C o 2003 2015 m m Permit figures for the construction of retail and e Completion Permit r c ia wholesale facilities have been booming since 2015, l Long-term trend estimation RSD 12bln o RSD 12bln u as bigger projects in Belgrade entered realization. tp u After a couple of years of regional development, this t (a t investment cycle puts big international shopping 2 0 1 10 5 2014 and volumes corrected significantly, standing 37% centres back into spotlight. This change produced a p (RSD bln) r lower than in 2013. This strong correction was a gap massive growth in permitted square meters in the ic e ) RETAIL AND created by delayed projects in Belgrade, separating retail segment. The first hike in permit numbers came RSD 8bln 84 RSD 8bln two investment cycles. The next wave of investments in December 2014, but the full force growth of the (EUR mln) started in 2015 and will come even stronger in 2016 new investment cycle came in H2 2015. The number WHOLESALE and beyond, with expected record output levels. of permitted square meters recorded a 388% growth rate, from 63.000m2 in 2014 to 308.000m2 in 2015. This segment has underwent quite a potent This exceptional result was caused by unblocking CONSTRUCTION development in recent years, partially because of permit procedures, as many investors anticipated the RSD 4bln RSD 4bln the large untapped market of modern retail space. reforms and waited for the implementation to apply. The lack of neighbourhood malls and modern retail The amount of permitted space will decrease in 2016 centres in smaller towns attracted a lot of investments by quite a margin, but will maintain historically very in the retail segment, but the development was stalled high levels. he retail segment finished one investment cycle in after 2008 for several years. The difficult investment T2014, but it did not wait for long before another one climate together with a dropping retail turnover made An important factor for this segment is an impressive RSD 0bln RSD 0bln started in 2015. The previous investment cycle began the market weary of expansion, even many facilities pipeline projects list, which is now entering realization. in 2011 and lasted till 2014, as volumes doubled from changed owners during the time. With the economic Currently active projects, the first ones that initiated EUR 52 million in 2010 to EUR 104 million in 2013. This recovery in 2015 and positive developments on the the output growth in 2015 are “Aviv park Zvezdara” cycle was largely produced by the construction of new labour market, this market segment is poised for a covering 13.000m2, “Rajiceva shopping center” holding retail parks in smaller cities, as well as the renovation very powerful performance. What made this boom 38.000m2 and “Belgrade Plaza” with 61.000m2. This of existing retail space. The end of the cycle was in even stronger came in mid-2015, as the new reformed was followed by projects that entered realization

2016 2017 2018 Main ongoing and planned Retail projects

RETAIL AND shopping centre holding around 100.000m2 planned modern retail space went up from 495.000m2 in 2014 for 2017, “Delta Planet” with 172.000m2 also planned to 570.000m2 in 2015. It is expected for the stock to in 2017 and “Spens shopping center” in Novi Sad overpass 600.000m2 in 2016 and gain much more in WHOLESALE with 115.000m2 planned for 2017. In addition, several 2017 as ongoing projects reach completion. With this smaller retail parks are in planning stage and famous rate of development, the stock is projected to reach German retailer “Lidl” is also entering the Serbian 800.000m2 of modern retail space by 2019. CONSTRUCTION market, it has acquired several land lots around the country planning to open 20 supermarket stores in the The positive developments in retail turnover are also forecast period. supporting a strong growth in the sector in 2015 and 2016. The long-awaited recovery of retail trade and The modern stock of retail and wholesale space is very the secured economic growth gave confidence to during 2016, including IKEA store in Belgrade with low in Serbia, and even below regional averages. In investors to initiate new expansion. In 2014, Serbia had 39.000m2, “Capitol park Rakovica” covering 25.000m2 Belgrade, like in other bigger towns, dominating high recorded the first growth of retail turnover since 2008 and “Borca retail park” with 13.000m2 of retail space. street retail and modern shopping centres stock per when trade increased by 2% against 2013. In 2015, this capita falls behind regional peers. This leaves a lot recovery continued to rise at a 1.8% rate with further But even with these projects underway, the pipeline is of space for further expansion of outputs and very acceleration in 2016. In the period Jan-Apr 2016, retail still very potent and includes some big international good prospects in the coming years. After a weak turnover grew by 10%, but this will slightly cool off shopping centres with large value, like “Ada Mall” with growth of stock since 2009, it substantially increased by the end of the year. The growth in turnover should 32.000m2 planned for late 2016, Belgrade waterfront in 2015 reaching 15% by the year end. The stock of maintain good rates until 2018.

230 SERBIA Retail and wholesale construction © EECFA 2016 SUMMER 25% of building construction is industrial INDUSTRIAL AND WAREHOUSING and warehouse (2015)

RSD 35bln RSD 35bln

Forecast

RSD 30bln RSD 30bln 202 (EUR mln)

RSD 25bln 24 RSD 25bln (RSD bln)

RSD 20bln RSD 20bln Long-term trend estimation

RSD 15bln Indust RSD 15bln rial a (at nd w 2015 are pric hou e) se out RSD 10bln put RSD 10bln

RSD 5bln RSD 5bln

RSD 0bln RSD 0bln

-8% 37%21% 58%45% 104%-23% 62%5% -11%10% 48%-4% -16%49% 51%12% -11%-24% -14%-6% -19%52% -6%-3% 15%3% 9%8% 15%9% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

SERBIA Retail and wholesale construction © EECFA 2016 SUMMER 231 SERBIA Industrial and warehousing © EECFA 2016 SUMMER 523

407

Permit and completion ('000 m2) 2003 2015 Completion Permit

efore the breakup of Yugoslavia and NATO bombings, there are attempts to revive production facilities and INDUSTRIAL AND BSerbia was a highly industrialised country with later sell them or create a joint-venture with potential almost half of its GDP generated by industrial investors. In previous years, Serbia privatized part of production. Almost a decade of economic sanctions its oil industries to Russian Gazprom and built a joint- WAREHOUSING devastated the industrial sector - the country’s venture car factory with Fiat. These big deals made a production and GDP lost almost 60% of its levels in significant boost to industrial construction at the time, 1991. The country is still trying to save its industrial with huge works on the reconstruction of oil refinery capacities and solve the large unemployment produced in Pancevo and the modernization of the car factory in by the collapse of entire manufacturing sectors. With Kragujevac. The restart of car industry in Kragujevac in the economic downturn in the Western economies in 2011 initiated a cycle of investments in car components 2008, Serbia was left without investments and the industry that is still underway. The next big cycle was shrinking service sector was an alarm for change. It initiated in 2014 with the large investment program is 2011 when reindustrialisation was stated as the being realized in the state-owned copper mining giant new economic policy and the pillar of future economic in Bor. This complex has seen the modernization of the development. smelting plant and the construction of a new sulphuric acid factory, together worth around EUR 250 million. Serbia is left with a huge industrial capacity in many different areas and the solutions are different for each Unfortunately, in May 2014 Serbia was hit with former industrial giant. Depending on the state of the disastrous floods that stopped the growth cycle of companies, their capacities and financial positions, industrial production initiated in 2013. The floods

232 SERBIA Industrial and warehousing © EECFA 2016 SUMMER Intermodal logistics center | Vrsac Eyemax Cargo Center | Nis | 100.000 m2 Serbia sold its steel mill in Smederevo to Chinese Lidl Logistic Center | Nova Pazova | 78.500 m2 multi phase project steel conglomerate “HBIS” (the third largest steel "Kaizen" textile industry | Smederevo | 13.500m2 producer in the world with yearly production of 47 2 Eyemaxx Log center extension | Stara Pazova | 30.000m million tons). Smederevo steel mill has a production "Medcomtech group" medical equipment | Leskovac | EUR 2mil. "Kopitarna-Nova" shoes factory | Apatin | EUR 0.7 mil. capacity of 2.1 million tons and the new owner took “Cinnovation group” noodles factory | Ruma | 35.000m2 - EUR 3.5 mil. up a USD 600 million loan to finance the upgrade of Mei Ta auto industry factory | Obrenovac | 40.000m2 - EUR 40 mil. the manufacturing process and the new production "Yura" auto industry factory | Leskovac | EUR 13mil. lines. This could be the industrial deal of the decade, as "Mecafor" auto industry factory | Kikinda | 5.000m2 - EUR 4 mil. IGB Automotive | Indjija | EUR 4.5mil. industrial output is preparing for another leap in 2017. "Krusik" ammunition cap factory extension | Valjevo | 1.200 m2 - EUR 8.7 mil. With steel industry in full swing, large contributors in SBS ammunition factory | Pozega | EUR 90 mil. the industrial production growth in the forecast period 2016 2017 2018 will be rubber and pneumatics industry, which went Main ongoing and planned Industrial projects through successful privatization and will reach EUR 500 million exports in 2017. Together with these, the Serbian military-industrial sector is also booming in production, and with numerous investments, it is again aspiring to become one of the leading industrial caused an enormous damage to the energy complex in exporters in the coming years. INDUSTRIAL AND Obrenovac, one of the largest open-cut coal mines and power plants in wider region. This produced a massive Industrial production had an unplanned set-back in decrease in industrial production as Serbia struggled to 2014 as floods hit coal industry; in 2014 it fell strongly WAREHOUSING repair the damage and normalize production for almost by 6.5% against its 2013 performance. It took several 12 months. In 2015 the Serbian government decided months for mines to be repaired and almost a year for to restart production in several closed state-owned all parameters to return to pre-flood figures. In mid- chemical factories with large production capacities. 2015, production normalized and industrial outputs These factories include petrochemical and nitrogen/ returned to a growth path. In 2015, industrial outputs fertilizer complexes in Pancevo and Methanol/Acidic went up by 8.2% against 2014 results, making up for acid factory in Kikinda. Big chemical producers have all the loss in the floods and growing further. In 2016, restarted production and are expected to increase industrial growth further accelerated, recording a 9.9% volumes several times in the coming years, as slowly rise in the period of Jan-Apr over the same period last they return to full capacity. Industrial production and year. It is expected for industrial production to maintain export growth in 2016 are also contributed to by these very high rates in 2017 and 2018 as well. three factories. Manufacturing was not hurt as much during the Positive developments in the Serbian industry have floods, but did suffer somewhat as well. In 2014 continued in 2016 as the government reached a large manufacturing lost 1.4% of its previous year’s outputs. privatization deal in steel industry. In April 2016 This was followed by a stronger increase in 2015

SERBIA Industrial and warehousing © EECFA 2016 SUMMER 233 SERBIA Industrial and warehousing © EECFA 2016 SUMMER with a 5.3% rise against 2014; but this growth rate The list of planned projects include Lidl logistics center is set to increase in the forecast period. During the (78.500m2) in Nova Pazova, “Kaisen” textile factory flood recovery, most of the growth was produced in (13.500m2) in Smederevo, Medcom Group factory (EUR mining and electricity production, but with most of the 2 million) in Leskovac, as well as Eyemaxx storage/ capacities now repaired – manufacturing will take the logistics centre in Nis Airport. stage. In the period of Jan-Apr in 2016, manufacturing hiked by 7.8% against the same period in 2015. With the growth in industrial production and investments, 2015 witnessed the first increase in Construction output in industrial and storage segment industrial workforce since 2000. The number of people had a good run in 2014, making historically high levels employed in manufacturing also started recovering of EUR 217 million and 52% growth of volumes against with even more notable gains of 2.5% of the total the previous year. This means that volumes will have workforce. It is expected for the number of people largely maintained levels in 2015, but are expected employed in the industrial segment to maintain growth to return to growth very fast. The 2016 figures, and in the coming period. The growth of employment in possibly the 2017 ones too, could easily produce a industry shows a continued strength in Q1 2016. double-digit growth in outputs. In the forecast period, the value of works done in industrial construction will The stock of industrial and warehouse facilities in be nearing EUR 300 million. Serbia amounts to around 1.000.000 square meters, after it went through large increase in 2014 and 2015. INDUSTRIAL AND Permitted space in the industrial segment corrected With the accelerating outputs it is expected for the 33% in 2014 after spiking 60% in 2013. The correction stock to make another large leap forward in 2017. The of permit figures in 2014 was just a one-time dip, as stock increased by 10% in 2015 with storage facilities WAREHOUSING issued industrial permits hit new record highs in 2015. boosting the overall added space. Permitted square meters grew by an amazing 59%, mostly produced in H2 2015. What is also encouraging The completion also had a good run with the outputs is that in 2016 they continued to go up in Q1 with a 56% peaking in 2014. The completion should contract rise against the same quarter in 2015. This growth rate slightly in 2015, but it’s expected to break new records is set to cool down by the end of the year, but maintain in completion levels in 2016 and after. The completion very good levels historically. grew from 344.000m2 in 2013 to 407.000m2 in 2014.

Important ongoing projects in industrial segment are Renovation figures had several cycles during the Mei Ta carburettor factory (40.000m2) in Obrenovac, previous decade, most notably in 2007 and 2011, when Yura car components (EUR 13 million) in Leskovac, SBS renovation figures achieved a record share of 49% in munitions factory (EUR 90 million) in Pozega, “Krusik” the total construction outputs in industrial segment. factory extension (EUR 9 million) in Valjevo, IGB After a strong correction in 2012 and 2013, they went Automotive (EUR 5 million) in Indjija, Mecafor factory up again in 2014 by 17.5%. With the restart of older (EUR 4 million) in Kikinda and others. industrial capacities, this figure will have a strong support in the forecasted period.

234 SERBIA Industrial and warehousing © EECFA 2016 SUMMER 3% of building construction HOTEL CONSTRUCTION is hotel (2015)

RSD 6bln RSD 6bln

Hotel output (at 2015 price)

Forecast RSD 4bln RSD 4bln d estimation Long-term tren

2.7 (RSD bln)

RSD 2bln 22 RSD 2bln (EUR mln)

RSD 0bln RSD 0bln

46% 21% 45%77% 104%8% 5%7% 10%7% 48%4% 49%29% 12%74% -24%-53% -14%-21% -19%-4% -3%15% 3%5% 35%8% 15%10% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

2016 2017 2018 Main ongoing and planned Hotel projects

he bright performance of tourism industry in Serbia because of the drop in living standards and lately due HOTEL Twas a rare shining spot in previous years. While to the much cheaper Mediterranean destinations. This most of the economy was shrinking, tourism grew prompted the government to initiate program for the at a double digit rate. Together with visitor numbers, support of domestic tourism, subsidizing vacations CONSTRUCTION the construction of modern international hotels also booked in domestic resorts and campaign for domestic followed. Hotel construction peaked in 2011 totalling tourists to spend holidays in the country. It can be said at almost EUR 60 million and since then contracted that the campaign was very successful, with powerful for 4 consecutive years. This negative correction of recovery of domestic visitors in 2015. In 2015, the value will end in 2015, when the new investment cycle number of domestic overnight stays rebounded by 8% should begin. With new projects starting in 2016 and against 2014. The trend continues in Q1 2016 for both 2017, output growth will sustain an upward trend in the tourist groups, with foreign overnight stays growing by forecast period. 19% and domestic ones going up by 16% over Q1 2015.

The number of foreign visitors and their overnight Permit figures started showing some recovery in 2014, stays has been growing constantly since 2001 and but it was not enough to push outputs higher during this continued in 2015 with a 12% growth compared that year. The number of permitted hotel space in 2014 to 2014 figures. On the other hand, economic woes rose 9% against the previous year, but then practically had started to seriously hurt the number of domestic stayed flat in 2015. The performance of hotel permits visitors, particularly since 2011. Domestic visits had in Q1 2016 has returned to growth with a several fold lost around 21% of their numbers by 2015, largely increase caused by the large project of Hotel Hilton in

236 SERBIA Hotel construction © EECFA 2016 SUMMER Belgrade. Permitted space is estimated to significantly of the 170-meter high tower on the River Sava banks in increase in 2016 compared to 2015, as more planned Belgrade the luxurious St.Regis Belgrade hotel will be investments further boost permit figures during the situated. The combined purpose tower will first have 9 year. storeys dedicated as a hotel and the remaining 32 floors HOTEL with branded business apartments. This project has Hotel construction maintained levels in previous entered realization, but the construction of the building years, but outputs should revive again in 2017 as will take almost 3 years. By the end of 2016 another CONSTRUCTION new hotel projects start construction. After many big hotel is also expected to see construction start in famous franchises arriving in the Serbian market, now Belgrade: Starwood’s “W” hotel with 120 rooms, also there is quite a diverse choice of international hotels as part of the Belgrade waterfront development. As including Crowne Plaza, Hayat, Holiday Inn, Radisson an addition, the construction start of Intercontinental Blu, Falkenstainer and others. The latest addition was Hotel Belgrade is also announced (worth around EUR Courtyard by Marriott, an investment worth EUR 25 40 million) in 2017. million that opened in central Belgrade in 2015. The new investment cycle has begun in 2016 and a couple of big In the period between 2011 and 2014 the share of projects will create boost for the whole segment in the renovation works in the total output increased from forecast period. Among ongoing projects, we highlight 23% to 43%, largely caused by the slowdown in new the construction of Hotel Hilton in Belgrade worth constructions, but also continued growth of the around EUR 40 million, whose construction started in renovation value. Like in the office segment, output March 2016 with its opening scheduled for 2018. What share of renovation here will also drop because most makes the good news for the hotel segment is the new projects are new constructions, but renovation recently announced purpose of the landmark tower, will also continue to go up in the coming period. part of the Belgrade waterfront development. As part

SERBIA Hotel construction © EECFA 2016 SUMMER 237 SERBIA Hotel construction © EECFA 2016 SUMMER 6% of building construction is education- HEALTH- AND EDUCATION- and health-related (2015) RELATED CONSTRUCTION

RSD 7bln RSD 7bln

) e ic pr RSD 6bln 5 RSD 6bln 01 t 2 (a ut tp ou RSD 5bln ed RSD 5bln elat Long-term trend estimationForecast ion-r Educat 4.2 Forecast RSD 4bln (RSD bln) RSD 4bln

ice) 35 15 pr (EUR mln) RSD 3bln (at 20 RSD 3bln Health-related output Long-term trend estimation

RSD 2bln 2 RSD 2bln (RSD bln) 17 RSD 1bln (EUR mln) RSD 1bln

RSD 0bln RSD 0bln

63% 3% 38% 35% -20% 6% -3% 8% 14% 21% -42% 2% 13% 5% 5% 4% 21% 45% 104% 5% 10% 48% 49% 12% -24% -14% -19% -3% 3% 8% 15% -9%2000 35%2001 25%2002 90%2003 152%2004 -45%2005 -32%2006 -5%2007 20089% 20099% -45%2010 -2%2011 31%2012 14%2013 80%2014 20159% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

2016 2017 2018 Main ongoing and planned Education- and Health-related projects HEALTH- AND ducation and health related construction was in combined value of just EUR 44 million. It is a far-cry Ea deep crisis, worsened by an ongoing budgetary from levels of EUR 95 million in 2007, but it seems EDUCATION- consolidation programme that halted all bigger better days are on the way. In recent years much larger investments in public buildings. This was particularly share is in the education construction, but the pipeline felt in 2013 as construction outputs of this sector activity shows very substantial developments in health RELATED decreased to record lows losing more than 40% in on the horizon. one year. After such a significant volume decrease, construction activity in this sector remained practically Permits have also suffered in 2013 and 2014 as the CONSTRUCTION on the ground, maintaining low levels during 2014. amount of permitted space collapsed in both education Since the budgetary consolidation came successful, and health. The education related permits fell 47% in the turnaround came in H2 2015 and 2016, as the 2013 and another 30% in 2014 against the previous government initiated a new reconstruction programme year. At the same time, compared with the previous for public buildings. This will be felt in both education year, health lost 70% of permitted space in 2013 and and health related construction, starting with 2015 and another 33% in 2014. This meant a practical halt of even more in 2016 and after. any meaningful construction on public buildings as austerity was in a full swing. Luckily, the good news Construction output in education and health has been came at the very end of 2015 and permit figures are struggling at historically low levels in 2014, with a the first to show the tide changing. In 2015, permitted

SERBIA Health- and education- related construction © EECFA 2016 SUMMER 239 SERBIA Health- and education- related construction © EECFA 2016 SUMMER space of education related buildings recovered with meters of different laboratories for chemical and a 137% rise, while permitted health buildings blasted pharmacological research. The construction of the 450% against 2014 figures. This meant that a very new centre in Kragujevac will be completed in 2017. strong recovery is coming and in permitted square Also, a new building of the ballet school in Novi Sad meters both segments surpassed levels they had is under construction, a facility with 15.000 square when austerity was introduced. Swift and fast recovery meters to reach completion in 2017. of education and health related construction is good news for the public domain and the overall construction In case of health related projects under construction, of public buildings. The growth of permitted square we would mention the primary health clinic in Belgrade meters in education and health continued to boom in Q1 worth around EUR 2 million and the Children's oncology 2016, with a 552% growth against same quarter in 2015. centre in Nis. What will make a difference for outputs These exceptional growth rates are a consequence is the announcement that the Serbian government of very low starting basis and will slow down in the will invest in the reconstruction and expansion of the HEALTH- AND course of the year. Clinical centre in Belgrade. This is the largest medical facility in the country, containing 23 different clinics The above mentioned government programme of and nine medical centres within an integrated complex EDUCATION- investments envisages the mid-term reconstruction with 50 buildings. Total area of the entire complex is of 3.000 different public buildings, mostly education over 280.000 m2 and the reconstruction will make a and health facilities. The programme was technically huge difference for health outputs in the coming years. RELATED initiated in 2016, with reconstruction of the first 51 This large investment cycle should cover reconstruction buildings worth EUR 5 million already underway. of 86.000m2 estimated to be worth EUR 90 million. The second phase will include 80 objects whose It is expected for the works on the Clinical centre in CONSTRUCTION reconstruction will start during 2016 and the value of Belgrade to begin in 2017. the cycle will be around EUR 8 million. This programme will continue in 2017 and 2018, until the already The renovation share of total output in education and approved list of around 1.500 buildings is completed. health construction has been shifting slowly from new constructions towards reconstructions during the last Among bigger investments in education and science we couple of years. Still, current levels of renovation will would mention the Centre for excellence in Kragujevac, grow substantially with return of public investments a stem cell research facility within University of in health segment. The share of renovation works Kragujevac. The construction of this modern centre should increase as health related construction gains began in February 2016 and will cover 11.500 square momentum in 2017 and after.

240 SERBIA Health- and education- related construction © EECFA 2016 SUMMER FORECAST TABLE 4

VALUE VALUE GROWTH RATES AT CONSTANT PRICE (%) SERBIA (RSD MLN) (EUR MLN) NON-RESIDENTIAL MARKET SIZE 2015 2015 2008 2009 2010 2011 2012 2013 2014 2015 2016(F) 2017(F) 2018(F) AND DEVELOPMENT

HOTEL. ACCOMODATION BUILDINGS 2 709 22 7.2 3.6 28.6 73.6 -53.4 -21.1 -4.1 15.2 4.5 35.0 10.0

OFFICE BUILDINGS 13 454 111 34.3 -16.0 -33.7 26.7 -0.8 -33.2 -16.2 21.1 9.7 5.0 5.3

RETAIL AND WHOLESALE BUILDINGS 10 097 84 34.5 -33.2 -35.8 4.2 48.6 25.7 -37.2 28.9 25.8 16.1 17.7

TRANSPORT BUILDINGS 2 292 19 41.0 -38.7 4.6 29.6 -13.4 -47.1 -2.9 274.1 -53.0 83.8 -35.0

INDUSTRIAL BUILDINGS AND WAREHOUSES 24 388 202 -11.1 -3.9 -15.7 50.6 -10.9 -5.6 52.1 -5.9 15.1 8.5 9.2

EDUCATION-RELATED BUILDINGS 4 168 35 6.2 -2.7 8.4 14.1 20.7 -42.1 2.4 13.4 5.2 5.0 4.4

HEALTH-RELATED BUILDINGS 2 018 17 -45.4 -32.4 -5.4 8.9 9.0 -44.8 -1.9 30.5 13.5 80.0 9.1

AGRICULTURAL BUILDINGS 3 435 28 -20.3 -16.9 -7.8 59.1 27.5 -6.8 6.8 29.2 17.0 1.1 1.1

OTHER NON-RESIDENTIAL BUILDINGS 3 218 27 44.2 -36.6 11.1 28.5 -4.3 -36.4 -29.4 16.8 16.0 4.4 8.7

TOTAL NON-RESIDENTIAL CONSTRUCTION 65 778 545 11.7 -18.3 -19.0 32.5 -1.8 -18.0 1.8 12.5 12.3 12.6 8.3

SERBIA Health- and education- related construction © EECFA 2016 SUMMER 241 SERBIA FORECAST TABLE 4 © EECFA 2016 SUMMER 68

Road construction, RSD bln (at 2015 prices) 2003 2018

Motorway projects are currently focused on the contracted Dimitrovgrad bypass highway planned to completion of the remaining sections of Corridor 10, reach completion in H2 2017. multimodal axis with two southern and two northern ROAD branches. The northern branches connect Serbia with The other most important project in road segment is the Hungary and Croatia, while the two southern ones lead construction of Corridor 11, or the motorway planned to towards Bulgaria and Greece. The remaining sections connect Serbia and Montenegro in the southwest and CONSTRUCTION left to be upgraded to a full-profile motorway are on Romania in the east. 2010 saw the construction start the two southern branches, with the total length of of the first section on this important motorway project, 87 km towards Bulgaria and another 42 km towards connecting Belgrade with Montenegro. With certain Macedonia and Greece. The entire length of the missing delays, the construction of this corridor was accelerated full-profile sections are under construction, planned to in 2013, when the government contracted another 92 be opened by mid-2017. km of the motorway. The motorway sections under construction include the 42 km long Ljig-Preljina section The motorway branch towards Greece will be opened contracted to Azerbaijani company “Azvirt” (planned for by end 2016 in most parts, except the Grdelica gorge opening in 2016), and Obrenovac-Ub and Lajkovac-Ljig sections that make a difficult construction task and sections contracted to a Chinese Shandong Hi-Speed he road network in Serbia is the largest capital will take more time to be completed. On the motorway group - totalling 50 km to be completed in H2 2017. In 2016 Tvalue in the country, with over 42.000 km of different branch towards Bulgaria, the government contracted it is also expected for government to contract sections category roads. This includes 725 km of motorways, the last remaining section in May 2016, making between Belgrade and Obrenovac at length of 25 km and 4.628 km of I category thoroughfares, 11.000 km of II the entire length of the missing motorway under Preljina-Pozega spanning 30 km. The remaining part of category roads and another 27.000 km of local road construction. Most of the motorway towards Bulgaria the motorway till the Montenegro border is 110 km long network. will be opened by end 2016, except for the recently and should be contracted in 2017/18. The construction of

2016 2017 2018 Main ongoing and planned Road projects

sections on the other side of the border in Montenegro decreased substantially in the last 5 years. The huge also began in 2016, including the motorway from road network in Serbia had been underinvested for Serbian border towards Bar at length of 170 km. The several years; the quality of roads started decaying. ROAD construction of the entire motorway will take almost 4 Luckily, road reconstruction will get a particular years to complete. boost in 2016, with the new government program in road reconstruction launched this year. This program CONSTRUCTION Other pipeline road projects in Serbia will include the will initially include the reconstruction of 1.100 km construction of 22km long Sector C of the Belgrade of different category roads in the next 3 years. This bypass highway, then Belgrade-Zrenjanin motorway reconstruction cycle started in late 2015 and will (90km), Ruma-Novi Sad motorway (37km) and Pojate- continue during the next 3 years with an estimated Preljina Morava corridor (110km). These projects are value of EUR 400 million. yet in planning stages and some of them could be contracted in 2017. With record new construction and the reinitiation of the reconstruction cycle, it seems that road outputs The performance of construction outputs have been are on track to this time break all-time record values somewhat subdued in spite of all new projects in road in the forecast period. Positive outlooks on budgetary infrastructure, mainly caused by the significant lack of expenditures and possible new investments with a reconstruction and shrinking maintenance funds. This continued economic growth are securing a period of meant that even if Serbia is building a record amount new expansion in road construction. of new roads, construction volumes were performing almost solely on new constructions. With austerity hurting all public investments, reconstruction figures

SERBIA Road construction © EECFA 2016 SUMMER 243 SERBIA Road construction © EECFA 2016 SUMMER 6.6

Railway construction, RSD bln (at 2015 prices) 2003 2018

erbian railways have long been neglected, and have underway for two years, and during that time several RAILWAY Snow been finally in a serious reconstruction cycle for important railway sections have been completed and more than 30 years. In previous decades maintenance a number of them is being modernized at the moment. was the only output created in this segment, making CONSTRUCTION it practically irrelevant for civil engineering or During 2014 and 2015 reconstruction was finished on total outputs. With expensive reconstructions and 3 sections totalling 65.5 km in length. In 2016 started the already existing network of motorways, the the reconstruction of three new sections on the government has for many years been reluctant to southern branch of the railway Corridor 10. These 3 enter a big and sustained investment cycle of railroad sections have a length of 46.5 km and reconstruction reconstruction. Serbia holds 3.809km long railroad is estimated to be worth USD 26.4 million. The track network, of which 1.768km is on the main corridors modernization on these 3 sections started in April and 1.279km is electrified. 2016 and is planned to be completed in H1 2017.

The decision to enter railroad reconstruction was 2016 also witnesses the beginning of the reconstruction finally made in 2013, when the deal worth USD 940 of Belgrade-Valjevo railway totalling 77 km in length. million was signed with Russian state railways (RZD), The plan is to start reconstruction in July 2016, with including repairs of all slow sections on the railway planned completion in H2 2017. Together with this Corridor 10, reconstruction of railway Beograd-Bar starts, the reconstruction and expansion of the Stara and Beograd-Pancevo as well as delivery of 27 new Pazova – Novi Sad railway line at length of 45 km diesel trains. This cooperation deal has already been and estimated value of USD 450 million. It includes

2016 2017 2018 Main ongoing and planned Railway projects

unbending curvy sections and upgrade to speeds of several important objects on the track, including RAILWAY 160 km/h. Making this railway line straight means the tunnels and a large bridge over Danube. This railway construction of two 700-meter-long tunnels and 3.5 bypass, as part of combined road/railway corridor, is km long viaduct. estimated to be worth EUR 430 million and planned to CONSTRUCTION enter construction in 2017. Another pipeline project getting closer to realization is the reconstruction of Novi Sad-Subotica railway. This reconstruction is planned as interstate three-party deal between Serbia, Hungary and China, covering 184 km on Serbian territory. This reconstruction includes the development of a fast railway line between Belgrade and Budapest financed by Chinese EXIM bank. The value of works on Serbian territory is estimated to be around USD 1 billion. This deal could be signed very soon, with very possible construction start in 2017.

An additional key project is the railway bypass in Belgrade involving the construction of a completely new railway line around the south-eastern suburbs in Belgrade totalling 29 km in length. It also includes

2016 2017 2018 Main ongoing and planned Other transport projects

he construction of new motorways has been giving a Corridor 11 towards Montenegro also to be completed OTHER TRANSPORT Tperformance boost for this segment in recent years this year. Motorways also include a number of viaducts and volumes peaked in 2012 with the construction and bridges, where only active corridor 11 sections of two big city bridges in Belgrade. After 2012 when contain over 100 different bridge or viaduct structures. RELATED outputs reached EUR 149 million, activity dropped Among other important bridge projects we would down consecutively in 2013 and 2014. The cumulative highlight new Zezelj Bridge in Novi Sad, 474 meter long drop was around 23% reaching levels of EUR 115 million railway bridge and Ostruznica Bridge over Sava River CONSTRUCTION in 2014. With railway reconstructions underway, more in Belgrade, a bypass highway bridge expansion worth bridges and tunnels will queue project lists boosting EUR 35 million. the new growth cycle in the construction outputs over the forecast period. The cycle of growth in the forecast period and after will come from a very strong list of pipeline projects. Increased activity in the southern and western parts 2017 will see the start of construction of Nestin Bridge of the country will intensify the construction of new in Backa Palanka worth EUR 50 million and Sava tunnels and bridges, including some of the longest Bridge on Belgrade-Obrenovac motorway at length of ones in the country. These include ongoing projects 1.766 meters. Also, the 1.3 km Bubanj Potok tunnel and of 1.8 kilometers long Manajle tunnel on the Corridor the 700 meters long Lestane tunnel on the Belgrade 10 motorway towards Greece planned to be opened bypass highway are planned, as well as the new 600 in 2016 and the 990 meter long Brancici tunnel on meter long bridge over the Danube in Vinca.

246 SERBIA Other transport related CONSTRUCTION © EECFA 2016 SUMMER Together with road projects, construction outputs will airport increased substantially in 2014 by 31% and OTHER TRANSPORT be also supported by planned railroad reconstructions another 3% in 2015. With the return of the flights to in the forecast period. Most notable projects will USA, passenger numbers on the airport will see more include a 3.5 km long viaduct and two 700 meter long growth in 2016 and 2017. This means that airport RELATED tunnel tubes, as part of the Belgrade-Novi Sad railway capacities are nearing their maximum utilization and line and two tunnel tubes on the Belgrade railway further investments will be necessary in the coming bypass with combined length of 2.5km. period. Investments will include the de-icing platform CONSTRUCTION worth EUR 3.5 million planned in 2016 and a possible In the pipeline stands the upgrade and reconstruction reconstruction of the main runway. The reconstruction of Belgrade’s Nikola Tesla Airport. The expansion of terminal buildings is also underway, with the of capacities comes as a consequence of the partial modernization of the existing waiting rooms and gate privatization of the national carrier Air Serbia (JAT) access corridors on A wing, and reconstruction of the and joint venture with UAE company Etihad. The Terminal 1’s central lobby. It is expected for Terminal modernization of the former state-owned company 2 expansion to begin in H2 2016, with 400 m2 of new recovered direct operations to over 40 destinations commercial space and extended self check-in area. around Europe and the Middle-East. On 23 June With these investments the estimated capacity of 2016, Air Serbia will re-establish direct flights to the airport will reach some 7.5 million passengers a New York, returning to the long-haul market after 25 year. Long-term plans envisage new terminal building, years. The number of passengers on the Belgrade expansion of the cargo capacities and new runway.

SERBIA Other transport related CONSTRUCTION © EECFA 2016 SUMMER 247 SERBIA Other transport related CONSTRUCTION © EECFA 2016 SUMMER 19.2

Energy-related* construction, RSD bln (at 2015 prices) 2003 2018

*including complex industrial structures

nergy industries make one of the largest After almost 30 years of no bigger investments in ENERGY, PIPELINE Econtributors in industrial production and in overall the energy sector, the government is finally making civil engineering outputs. This segment grew even moves to rationalize and reform this enormous while other fields contracted and peaked in 2012 with economic potential. This means the restructuring of CONSTRUCTION EUR 187 million. After a strong shrinkage in 2013 when the state-owned “Electric Power Industry of Serbia” outputs reached just EUR 131 million, this segment (EPS), which makes the largest enterprise in the went up constantly reaching levels of around EUR 160 country with almost 40.000 employees. Parallel with million in 2015. This improving performance should the reorganization of the company, there are several be just the prelude for the expected growth and new investments in reconstruction of existing capacities output records in the forecast period. and the construction of new ones. With certain delays, in 2016 finally started the construction of the new Permit figures are also adding to the confidence for power generating block in the Kostolac power plant, this segment with a recorded growth of numbers for which also includes coal mine expansion and an already the last 2 years. After a very difficult 2013, permits completed desulphurization plant. The new block will recovered with a 19.5% growth in 2014 and another 19% be completed in 2020, adding another 350 MW to the in 2015. This positive development in permit numbers is existing 8.359 MW of installed EPS capacity. The value expected to continue in 2016, with double-digit growth of the entire project is USD 1.1 billion. Together with in Q1 2016. This confirms current upturn-performance this, in 2016 started the big reconstruction of TENT of the segment, but new projects and investments will power plant B2 block worth almost EUR 70 million, to push it much higher in the forecast period. be completed by the end of the year.

2016 2017 2018 2019 2020 2021 2022 Main ongoing and planned Energy-related projects

During 2016 starts the construction of the 68 km long problem comes from the fact that the cost of electricity ENERGY, PIPELINE high-voltage transmission line towards Romania. The in Serbia is several times cheaper than the European value of the works is estimated at EUR 25 million and average. In order to attract investments and make the planned completion is late 2017. In the pipeline renewable sources competitive, it is necessary to CONSTRUCTION is the construction of the international high-voltage make unacceptably high subsidies. This is making the connection Bajina Basta-Pljevlja-Visegrad worth EUR government quite unwilling to give support for private 48 million and planned to enter construction in 2017. renewable energy investments and this will continue In the transmission network, there are also several to hold breaks on the sector's development in the transformer stations planned including “Beograd 23” forecast period. worth EUR 8 million and two stations as a part of the Belgrade Waterfront project. The oil industry is also making bigger investments in this period, particularly the next cycle of upgrades Private initiative is largely investing in renewable in Pancevo oil refinery. The largest investment is sources and in 2015 the first wind farm opened in definitely the construction of a new deep conversion Serbia, realized in Kula with the capacity of 10 MW and unit valued at around USD 300 million that started in a value of EUR 15 million. Although there are ready late 2015. It is a project planned for completion in 2019, projects in several locations like Plandiste (102 MW) aiming to improve efficiency and the ecological imprint and Cibuk (300 MW), the reluctance of the government of the production process. Also, we would mention the to support these investments is causing any starting construction of the high quality specialty base oils dates for these projects very questionable. The factory in Novi Sad refinery. This is a pipeline project

SERBIA Energy, pipeline construction © EECFA 2016 SUMMER 249 SERBIA Energy, pipeline construction © EECFA 2016 SUMMER with possible construction after the forecast period projects would most probably come after the forecast ENERGY, PIPELINE worth EUR 130 million. period, and the Drina River projects are closest to the realization at the moment, probably 2017/18. Hydro-electric power is also area of many pipeline CONSTRUCTION projects, but it is still very hard to say when the possible In long distance pipeline construction, the most realization of the projects could be set in motion. important project is the distribution gas pipeline Hydro potential in electricity production is one great that will enable the gasification of the southwestern field of development with several projects in planning part of the country. The construction of the regional stages. These would be the massive Djerdap 3 project, distributive system in Raska region will cost around Europe’s largest reversible hydro-plant worth EUR 4 EUR 65 million, planned for completion in 2018. billion, Bistrica dam and hydro-plant worth EUR 600 million and the cascade of six hydro-plants on Drina river valued at EUR 870 million (“Buk Bijela” plant in the north Drina basin; “Dubrava”, “Tegare” and “Rogačica” plants in the central part; and “Kozluk” and “Drina” plants in the southern part of the Drina basin). These

2016 2017 2018 Main ongoing and planned Utility and Other civil engineering projects

Permit numbers also confirm good outlooks with Other ongoing public utility projects making up current consecutive growth in 2014 and in 2015. The number outputs, particularly in the water management sector. of permits stabilized in 2014 with a 5% growth against We would mention Salinac water factory (EUR 3.2 mil) PUBLIC UTILITY 2013, but recovered strongly in 2015. The number of planned for opening in 2016, Zrenjanin water factory issued permits for the public utility sector hit record (EUR 6.5 mil) and two bigger water collectors. In 2016 levels in 2015, with 27% growth compared with 2014. also starts the construction of Subotica water factory The trend continues in Q1 2016 with a milder expansion worth EUR 6 million. expected to sustain for the rest of the year. Pipeline in this segment holds great potential in growth The most important public utility projects in previous with a couple of very distinctive and large projects. The utputs in public utilities have been on a downward years were gasification projects and the development first one is the modernization of the Belgrade landfill Opath since 2011, when the value of works peaked at of the local gas network. Natural gas is a quite new in Vinca. Modernization of the city’s largest landfill levels of EUR 213 million. Although volumes decreased energy source for many regions in Serbia, as the could initiate investments valued at EUR 250 million, in 2012 and 2013, it is still a quite historically high level country has not been covered with local network. which would include the reconstruction of the existing as investments surged on neglected public utilities. In Most of the households’ needs have been relying waste lots and the construction of the new recycling 2015, public investments returned to recovery and with on electricity and the expansion of the gas market plant. The local council is looking for a private-public it outputs grew as well. Expected value of public utility for households created a new growth area. This partnership deal and the contract could be signed in construction in 2015 will recover to above EUR 175 investment cycle in gas utilities from previous years 2017. The second one is the water management facility million from EUR 168 million in 2014. Growth in public carry with more households on the network every in Nis estimated to be worth EUR 70 million. This investments in utility infrastructure will continue to year. Only 10% of households in Serbia uses gas in their project is also in preparation and will not start before gain value in the forecast period because austerity everyday needs, so it will continue to support public 2017. ends and public investments normalize their flow. utility outputs in the following years.

SERBIA Energy, pipeline construction © EECFA 2016 SUMMER 251 SERBIA Public utility © EECFA 2016 SUMMER his civil engineering segment is closely tied Output levels speak of very little activity and we would Tto budgetary finances and the level of public highlight the reconstruction of the medieval fortress OTHER CIVIL investments. It meant a very difficult period during the in Golubac worth EUR 6.5 million. It encompasses austerity and fiscal consolidation program that started zje construction of traffic deviation to protect the fort in 2013. It practically halved in 2013 losing almost 60% and the construction of a visitor center and a small ENGINEERING of its outputs, only to drop another 30% in 2014. The dock for cruising tourist ships on the Danube. The value of this segment fell from EUR 44 million in 2012 reconstruction will be completed in 2017. to just EUR 14 million in 2014. The output levels will start increasing in 2016, with an expected renewed Another one is the athletic stadium in Novi Pazar, with growth in forecast period. the second phase underway including the construction of the spectator stands worth around EUR 1.3 million. Permits were also bottoming during the previous couple of years and finally started to recover in H2 In 2016 also started the construction of the Brzece 2015. By the end of 2015, the total number of permits skiing tracks on Kopaonik valued at EUR 0.5 million. In grew 57% against the 2014 results. This announced planned projects there are also more developments faster-than-expected recovery of the segment and the on skiing infrastructure, including new tracks on Stara trend continued in Q1 2016. Continued increased permit Planina and the new skiing tracks on Golija Mountain levels also substantiate the anticipated sustained worth EUR 19 million. growth in outputs.

252 SERBIA other civil engineering © EECFA 2016 SUMMER FORECAST TABLE 5

VALUE VALUE GROWTH RATES AT CONSTANT PRICE (%) SERBIA (RSD MLN) (EUR MLN) CIVIL ENGINEERING MARKET SIZE 2015 2015 2008 2009 2010 2011 2012 2013 2014 2015 2016(F) 2017(F) 2018(F) AND DEVELOPMENT

TRANSPORT INFRASTRUCTURE 95 953 795 0.8 -25.6 3.5 15.8 -0.2 -15.7 9.9 23.2 10.3 7.1 -1.7

ROADS 68 453 567 -6.2 -21.2 -5.8 12.2 -9.2 -14.9 16.6 19.4 10.4 7.2 -4.7

RAILWAYS 6 635 55 -3.0 1.9 25.7 -10.5 -18.4 -5.5 14.0 164.2 4.3 50.8 8.1

AIRFIELDS 312 3 -87.9 1 531.3 -38.9 -52.7 413.3 79.3 -61.6 122.9 42.7 25.4 2.1

BRIDGES AND TUNNELS 16 584 137 80.0 -61.7 120.1 42.0 55.1 -17.4 -10.2 21.0 8.5 -4.3 0.0

HARBOURS 3 970 33 39.4 -36.5 20.9 34.0 -7.9 -26.7 8.5 -5.1 23.2 -16.2 26.0

ENERGY. COMPLEX INDUSTRIAL AND LONG TERM PIPELINES 19 158 159 0.8 -11.8 6.2 32.0 10.3 -32.2 11.7 8.6 15.9 40.3 11.5

PUBLIC UTILITY 22 183 184 14.6 -17.9 -11.4 73.9 -3.6 -10.8 -6.1 10.4 8.7 3.9 4.8

OTHER CIVIL ENGINEERING 1 956 16 -13.3 -36.2 -1.7 -17.6 -13.3 -57.4 -29.9 19.3 12.5 6.1 4.1

TOTAL CIVIL ENGINEERING CONSTRUCTION 139 251 1 153 1.1 -23.8 1.3 23.3 0.2 -19.3 6.2 18.8 10.8 11.4 1.7

SERBIA other civil engineering © EECFA 2016 SUMMER 253 SERBIA FORECAST TABLE 5 © EECFA 2016 SUMMER PROJECT DATA: NON-RESIDENTIAL

KEY ONGOING AND PLANNED NON-RESIDENTIAL PROJECTS IN SERBIA

(PLANNED) PLANNED SEGMENT STATUS NAME LOCATION VOLUME START END

OFFICE ONGOING DENEZA OFFICE BUILDING H1 2014 H2 2015 BELGRADE 3.000 M2

OFFICE ONGOING GTC FORTYONE COMPLEX H1 2014 H1 2019 BELGRADE 40.000 M2 - EUR 50 MIL.

OFFICE ONGOING SOCIETE GENERALE H1 2014 H1 2016 BELGRADE 11.000 M2 - EUR 15 MIL.

OFFICE ONGOING AIRPORT CITY Q1 2015 Q4 2016 BELGRADE 20.000 M2 - EUR 25 MIL.

OFFICE ONGOING EDB H2 2014 Q2 2016 BELGRADE 8.000 M2

OFFICE ONGOING MPC NAVIGATOR BUSINESS CENTER Q1 2015 Q3 2016 BELGRADE 22.000M2 - EUR 20 MIL.

OFFICE PLANNED DELTA HOLDING HQ Q3 2015 Q2 2017 BELGRADE 21.000M2 - EUR 25 MIL.

OFFICE PLANNED SIRIUS OFFICES Q4 2015 Q2 2017 BELGRADE 27.000M2

OFFICE PLANNED EPS HQ Q2 2016 Q2 2018 BELGRADE 42.000M2

OFFICE PLANNED BEKO COMPLEX Q1 2017 Q2 2019 BELGRADE 94.000M2 - EUR 200 MIL.

OFFICE PLANNED SKY PLAZA Q1 2017 Q1 2019 BELGRADE 100.000M2 - EUR 150 MIL.

OFFICE PLANNED GP NPARED HQ Q2 2016 Q3 2017 BELGRADE 13.500M2 - EUR 8 MIL.

OFFICE PLANNED GALENS INVEST OFFICE AND RESIDENTIAL BUILDING Q1 2017 H2 2018 NOVI SAD 45.000M2 EUR 50 MIL.

254 SERBIA PROJECT DATA: NON-RESIDENTIAL © EECFA 2016 SUMMER PROJECT DATA: NON RESIDENTAL

KEY ONGOING AND PLANNED NON-RESIDENTIAL PROJECTS IN SERBIA

(PLANNED) PLANNED SEGMENT STATUS NAME LOCATION VOLUME START END

OFFICE PLANNED DURST OFFICES Q2 2016 H2 2017 BELGRADE 14.000M2

RETAIL, WHOLESALE ONGOING RAJICEVA ST. SHOPPING CENTER H2 2014 H1 2017 OLD TOWN, BELGRADE 38.000 M2

RETAIL, WHOLESALE ONGOING IMMOFRANZ STOP SHOP Q1 2015 Q1 2016 NIS 10.000M2 - EUR 5MIL.

RETAIL, WHOLESALE ONGOING AVIV PARK Q1 2015 Q3 2016 ZRENJANIN 22.000M2 - EUR 30MIL.

RETAIL, WHOLESALE ONGOING SKY PLAZA H1 2015 Q2 2017 KARABURMA, BELGRADE 100.000 M2 - EUR 120 MIL.

RETAIL, WHOLESALE ONGOING MPC RETAIL PARK "SHOPPI" Q2 2015 Q3 2016 SUBOTICA 10.000M2 - EUR 10MIL.

RETAIL, WHOLESALE PLANNED IKEA STORE H2 2015 H2 2016 NEW BELGRADE 38.680M2 - EUR 40 MIL.

RETAIL, WHOLESALE PLANNED VISNJICKA PLAZA H2 2016 H1 2019 KARABURMA, BELGRADE 100.000 M2 - EUR 120 MIL.

RETAIL, WHOLESALE PLANNED DELTA PLANET H1 2016 H2 2018 AUTOKOMANDA BELGRADE 172.000 M2 - EUR 200 MIL.

RETAIL, WHOLESALE PLANNED CAPITOL PARK RAKOVICA Q1 2016 H2 2017 BELGRADE 22.000M2

RETAIL, WHOLESALE PLANNED CAPITOL PARK SOMBOR Q3 2015 Q3 2016 SOMBOR 9.000M2 - EUR 10 MIL.

RETAIL, WHOLESALE PLANNED BIG SHOPPING CENTER SABAC Q3 2015 Q3 2017 SABAC 10.600 M2

RETAIL, WHOLESALE PLANNED MAPEX NEIGHBOURHOOD SHOPPING CENTER Q3 2015 Q3 2016 BELGRADE, BORCA 8.900M2

255 SERBIA PROJECT DATA: NON RESIDENTAL © EECFA 2016 SUMMER PROJECT DATA: NON RESIDENTAL

KEY ONGOING AND PLANNED NON-RESIDENTIAL PROJECTS IN SERBIA

(PLANNED) PLANNED SEGMENT STATUS NAME LOCATION VOLUME START END

RETAIL, WHOLESALE PLANNED PART OF BEKO COMPLEX Q4 2016 H1 2019 DORCOL DANUBE RIVER BANK 94000M2 - EUR 200 MIL.

RETAIL, WHOLESALE PLANNED PART OF SKY PLAZA Q1 2017 H1 2019 KNEZA MILOSA STREET 100.000M2 - 150MIL EUR

RETAIL, WHOLESALE PLANNED SKADARLIJA SHOPPING CENTER H1 2016 H2 2018 SKADARLIJA CITY CENTER 42.000 M2

RETAIL, WHOLESALE PLANNED GTC ADA MALL H1 2016 H2 2018 ADA LAKE, BELGRADE 30.000 M2

RETAIL, WHOLESALE PLANNED MPC BORCA RETAIL PARK Q2 2016 H1 2017 BELGRADE BORCA 13.000M2 - EUR 6 MIL.

RETAIL, WHOLESALE PLANNED IMMOFRANZ STOP SHOP Q1 2016 Q4 2016 VRANJE 5.500M2 - EUR 2.5MIL.

RETAIL, WHOLESALE PLANNED IMMOFRANZ STOP SHOP Q1 2016 Q4 2016 VALJEVO 6.500M2 - EUR 3.5MIL.

RETAIL, WHOLESALE PLANNED LIDL Q2 2016 Q4 2017 AROUND SERBIA 10 SUPERMARKETS

INDUSTRIAL, WAREHOUSES ONGOING DR.OETKER H1 2014 H1 2016 BELGRADE EUR 9.5 MIL.

INDUSTRIAL, WAREHOUSES ONGOING "INDOFOOD" INSTANT SOUP FACTORY H1 2014 Q3 2015 INDJIJA EUR 11 MIL.

INDUSTRIAL, WAREHOUSES ONGOING METEH FACTORY Q3 2015 H2 2016 SMEDEREVO 6.000M2

INDUSTRIAL, WAREHOUSES ONGOING CCVI ROLLER BEARINGS FACTORY Q2 2015 Q2 2016 SMEDEREVO 4.000M2, EUR 4 MIL.

INDUSTRIAL, WAREHOUSES ONGOING PPP - SLODES LOGISTIC CENTER Q3 2015 Q1 2019 APATIN 8.500M2, EUR 6.4 MIL.

256 SERBIA PROJECT DATA: NON RESIDENTAL © EECFA 2016 SUMMER PROJECT DATA: NON RESIDENTAL

KEY ONGOING AND PLANNED NON-RESIDENTIAL PROJECTS IN SERBIA KEY ONGOING AND PLANNED NON-RESIDENTIAL PROJECTS IN SERBIA

(PLANNED) PLANNED (PLANNED) PLANNED SEGMENT STATUS NAME LOCATION VOLUME SEGMENT STATUS NAME LOCATION VOLUME START END START END

RETAIL, WHOLESALE PLANNED PART OF BEKO COMPLEX Q4 2016 H1 2019 DORCOL DANUBE RIVER BANK 94000M2 - EUR 200 MIL. INDUSTRIAL, WAREHOUSES ONGOING TIGAR PLANT EXTENSION H2 2015 H2 2016 PIROT EUR 2 MIL.

RETAIL, WHOLESALE PLANNED PART OF SKY PLAZA Q1 2017 H1 2019 KNEZA MILOSA STREET 100.000M2 - 150MIL EUR INDUSTRIAL, WAREHOUSES PLANNED EYEMAX CARGO CENTER Q1 2017 Q1 2018 NIS 100.000 M2

RETAIL, WHOLESALE PLANNED SKADARLIJA SHOPPING CENTER H1 2016 H2 2018 SKADARLIJA CITY CENTER 42.000 M2 INDUSTRIAL, WAREHOUSES PLANNED "TOP SOFA" INVESTOR DITRE ITALIA Q3 2015 Q1 2016 VRANJE 13.000 M2

RETAIL, WHOLESALE PLANNED GTC ADA MALL H1 2016 H2 2018 ADA LAKE, BELGRADE 30.000 M2 INDUSTRIAL, WAREHOUSES PLANNED TIGAR PLANT EXTENSION Q2 2015 Q1 2016 PIROT EUR 2 MIL.

RETAIL, WHOLESALE PLANNED MPC BORCA RETAIL PARK Q2 2016 H1 2017 BELGRADE BORCA 13.000M2 - EUR 6 MIL. INDUSTRIAL, WAREHOUSES PLANNED INTERMODAL LOGISTICS CENTER Q2 2016 Q1 2018 VRSAC

RETAIL, WHOLESALE PLANNED IMMOFRANZ STOP SHOP Q1 2016 Q4 2016 VRANJE 5.500M2 - EUR 2.5MIL. INDUSTRIAL, WAREHOUSES PLANNED LOGISTIC TRIMODAL CENTER Q2 2017 H1 2019 APATIN EUR 6.4 MIL.

78.500 M2 MULTI PHASE RETAIL, WHOLESALE PLANNED IMMOFRANZ STOP SHOP Q1 2016 Q4 2016 VALJEVO 6.500M2 - EUR 3.5MIL. INDUSTRIAL, WAREHOUSES PLANNED LIDL LOGISTIC CENTER H1 2016 H2 2018 NOVA PAZOVA PROJECT

RETAIL, WHOLESALE PLANNED LIDL Q2 2016 Q4 2017 AROUND SERBIA 10 SUPERMARKETS INDUSTRIAL, WAREHOUSES PLANNED DITRE ITALIA FURNITURE FACTORY Q1 2016 Q4 2016 VRANJE EUR 13.4 MIL.

INDUSTRIAL, WAREHOUSES ONGOING DR.OETKER H1 2014 H1 2016 BELGRADE EUR 9.5 MIL. INDUSTRIAL, WAREHOUSES PLANNED TEKLAS AUTOMOTIVE AUTO INDUSTRY FACTORY Q1 2016 Q4 2016 VLADICIN HAN EUR 11.3 MIL.

INDUSTRIAL, WAREHOUSES ONGOING "INDOFOOD" INSTANT SOUP FACTORY H1 2014 Q3 2015 INDJIJA EUR 11 MIL. INDUSTRIAL, WAREHOUSES PLANNED CAMOZZI Q2 2016 Q4 2016 SABAC EUR 10 MIL.

INDUSTRIAL, WAREHOUSES ONGOING METEH FACTORY Q3 2015 H2 2016 SMEDEREVO 6.000M2 HOTEL ONGOING CITY HOTEL BELGRADE H1 2013 H2 2015 BELGRADE 2 000 M2

INDUSTRIAL, WAREHOUSES ONGOING CCVI ROLLER BEARINGS FACTORY Q2 2015 Q2 2016 SMEDEREVO 4.000M2, EUR 4 MIL. HOTEL ONGOING EX FAMILY SPORT "DOLI BEL"LUXURY HOTEL RESIDENCES Q1 2015 Q4 2015 KOPAONIK MOUNTAIN 1.400M2 - EUR 2MIL.

INDUSTRIAL, WAREHOUSES ONGOING PPP - SLODES LOGISTIC CENTER Q3 2015 Q1 2019 APATIN 8.500M2, EUR 6.4 MIL. HOTEL ONGOING PROPERTY INVESTMENT LLC - EX-JUGOBANKA HOTEL Q2 2015 Q3 2016 KOPAONIK MOUNTAIN 10.000M2 - EUR 30MIL.

257 SERBIA PROJECT DATA: NON RESIDENTAL © EECFA 2016 SUMMER PROJECT DATA: NON RESIDENTAL

KEY ONGOING AND PLANNED NON-RESIDENTIAL PROJECTS IN SERBIA

(PLANNED) PLANNED SEGMENT STATUS NAME LOCATION VOLUME START END

HOTEL ONGOING EXPANSION OF GRAND HOTEL Q3 2015 Q4 2016 KOPAONIK MOUNTAIN 3.500M2, 70 NEW APARTMENTS

HOTEL PLANNED KEMPINSKI HOTEL H2 2016 H1 2018 NEW BELGRADE DANUBE RIVER BANK

HOTEL PLANNED HILTON HOTEL H1 2016 Q2 2018 BELGRADE EUR 40 MIL.

HOTEL PLANNED FALKENSTEINER HOTEL H1 2017 H1 2019 STARA PLANINA EUR 30 MIL.

HOTEL PLANNED RAJICEVA COMPLEX (HOTEL AND SHOPPING) H1 2017 H1 2019 RAJICEVA STREET, BELGRADE CITY CENTER 19.000 M2

HOTEL PLANNED EX FAMILY SPORT "DOLI BEL"LUXURY HOTEL RESIDENCES Q3 2015 Q3 2016 KOPAONIK MOUNTAIN 1.400M2 - EUR 2MIL.

HOTEL PLANNED PREZIDENT D.O.O. HOTEL Q3 2015 Q3 2016 BELGRADE 2.550M2

HOTEL PLANNED BEKO COMPLEX Q3 2016 H1 2019 DORCOL DANUBE RIVER BANK 94.000M2 - EUR 200 MIL.

HOTEL PLANNED SKY PLAZA Q3 2016 H2 2018 KNEZA MILOSA STREET 100.000M2 - EUR 150 MIL.

HOTEL PLANNED DELTA REAL ESTATE HOTEL H1 2017 H1 2018 LESKOVAC 3.000M2

HOTEL PLANNED INTERCONTINENTAL HOTEL H1 2016 H1 2017 BELGRADE EUR 40 MIL.

BELGRADE (PART OF BELGRADE WATERFRONT HOTEL PLANNED "W" HOTEL H2 2016 H1 2019 PROJECT)

EDUCATION ONGOING ELEMENTARY SCHOOL, KINDER GARTEN Q1 2015 Q4 2015 NOVI PAZAR EUR 7 MIL.

258 SERBIA PROJECT DATA: NON RESIDENTAL © EECFA 2016 SUMMER PROJECT DATA: NON RESIDENTAL

KEY ONGOING AND PLANNED NON-RESIDENTIAL PROJECTS IN SERBIA

(PLANNED) PLANNED SEGMENT STATUS NAME LOCATION VOLUME START END

EDUCATION ONGOING UNIVERSITY DORMITORY Q2 2009 Q4 2015 NIS 12.182M2 - EUR 5.5MIL.

EDUCATION ONGOING EXTENSION - FACULTY OF ECONOMICS H1 2015 H1 2016 BUJANOVAC 2.500M2 - EUR 1 MIL.

EDUCATION ONGOING EXTENSION OF ELEMENTARY SCHOOL STEPA STEPANOVIC Q3 2015 Q4 2016 KUMODRAZ 2.500M2 - EUR 1.6 MIL.

EDUCATION ONGOING 4 - GRADE PRIMARY SCHOOL Q3 2015 H2 2016 GORNJI MILANOVAC EUR 0.8 MIL.

EDUCATION PLANNED CENTER OF EXELENCE H2 2015 Q4 2016 KRAGUJEVAC 11.500M2 - EUR 20 MIL.

EDUCATION PLANNED MUSIC AND BALLET SCHOOL Q2 2016 Q4 2017 NOVI SAD

EDUCATION PLANNED ZEMUN ALTINA KINDERGARTEN 2016 2016 BELGRADE 800M2

EDUCATION PLANNED ELEMENTARY SCHOOL 2016 2016 BELGRADE, MALI MOKRI LUG

EDUCATION PLANNED "IVAN GORAN KOVACIC" ELEMENTARY SCHOOL 2015 2016 BELGRADE

HEALTH ONGOING CLINICAL CENTER CONNSTRUCTION AND RECONSTRUCTION H1 2013 Q2 2016 NIS 27.000 M2 EUR 31.5 MIL.

HEALTH ONGOING DIAGNOSTIC CENTER Q1 2015 Q2 2016 NOVI PAZAR 1.400M2

HEALTH PLANNED LABUDOVO BRDO PRIMARY HEALTH CLINIC H2 2015 Q3 2016 BELGRADE 2.000M2

HEALTH PLANNED BELGRADE CLINICAL CENTER H1 2017 H1 2019 BELGRADE 200 MIL EUR

KEY ONGOING AND PLANNED NON-RESIDENTIAL PROJECTS IN SERBIA

(PLANNED) PLANNED SEGMENT STATUS NAME LOCATION VOLUME START END

HEALTH PLANNED KRAGUJEVAC HOSPITAL H1 2016 H1 2019 KRAGUJEVAC 2500M2

HEALTH PLANNED MATERNITY WING Q3 2015 Q4 2016 CACAK

HEALTH PLANNED ACIBADEM HOSPITAL Q3 2016 H1 2018 BELGRADE 100MIL USD

HEALTH PLANNED STEM CELL BANK Q2 2016 H1 2017 KRAGUJEVAC 11.000M2 - 16.5MIL EUR

HEALTH PLANNED "DEDINJE 2" HEART DESEASE INSTITUTE Q2 2016 Q2 2018 BELGRADE 11.500M2 - 25 MIL EUR

HEALTH PLANNED GENERAL HOSPITAL Q1 2016 Q4 2016 NOVI PAZAR 5.4MIL EUR

HEALTH PLANNED BORCA PRIMARY HEALTH CLICNIC H1 2016 H2 2017 BELGRADE 3.500M2

HEALTH PLANNED FINISHING VRANJE HOSPITAL EXTENSION Q2 2016 H1 2018 VRANJE 6.000M2 - EUR 4.6 MIL.

HEALTH PLANNED EMERGENCY CENTER Q2 2016 Q3 2017 NOVI SAD 2.700M2

TRANSPORT BUILDINGS ONGOING PROKOP TRAIN STATION H1 2015 H2 2016 BELGRADE EUR 26 MIL.

TRANSPORT BUILDINGS ONGOING TECHNICAL TRAIN BUILDING AT MAIN PANCEVO STATION H1 2014 Q2 2016 PANCEVO

TRANSPORT BUILDINGS PLANNED CENTRAL BUS STATION H1 2016 H2 2017 BELGRADE EUR 20-30 MIL.

TRANSPORT BUILDINGS PLANNED "NIKOLA TESLA AIRPORT" EXPANSION H1 2016 H2 2019 BELGRADE EUR 200 MIL.

KEY ONGOING AND PLANNED NON-RESIDENTIAL PROJECTS IN SERBIA

(PLANNED) PLANNED SEGMENT STATUS NAME LOCATION VOLUME START END

TRANSPORT BUILDINGS PLANNED TRAIN STATION H1 2017 H2 2017 KAMENDIN EUR 1 MIL.

TRANSPORT BUILDINGS PLANNED TRAIN STATION H1 2017 H2 2017 ALTINA EUR 1 MIL.

TRANSPORT BUILDINGS PLANNED BUS STATION H1 2016 H2 2017 KRAGUJEVAC EUR 5-12 MIL.

OTHER NON-RESIDENTIAL ONGOING MUSEUM OF MODERN ART RECONSTRUCTION H1 2008 H1 2016 BELGRADE EUR 8 MIL.

OTHER NON-RESIDENTIAL ONGOING THE NATIONAL MUSEUM RENOVATION H1 2015 H1 2016 BELGRADE EUR 7.5 MIL.

OTHER NON-RESIDENTIAL ONGOING ST. SIMEON CHURCH AND PARISH HOUSE H1 2010 H1 2015 BELGRADE

OTHER NON-RESIDENTIAL ONGOING INDOOR ATHLETIC STADIUM H1 2014 H1 2016 BELGRADE EUR 4 MIL.

OTHER NON-RESIDENTIAL ONGOING GOLUBAC FORTRESS RECONSTRUCTION H1 2014 H2 2016 GOLUBAC EUR 6.5

OTHER NON-RESIDENTIAL PLANNED PETROVARADIN SPORTS HALL H1 2016 H2 2016 NOVI SAD EUR 1.25MIL.

OTHER NON-RESIDENTIAL PLANNED INDOOR POOL "PINKI" H1 2016 H2 2016 SREMSKA MITROVICA EUR 1 MIL.

OTHER NON-RESIDENTIAL PLANNED NIS FORTRESS RESTAURATION - 2013 2023 NIS EUR 9 MIL.

OTHER NON-RESIDENTIAL PLANNED SPORTS HALL 2016 2016 UZICE

KEY ONGOING AND PLANNED CIVIL ENGINEERING PROJECTS IN SERBIA

(PLANNED) PLANNED SEGMENT STATUS NAME LOCATION VOLUME START END

ROAD ONGOING CORRIDOR 11 H1 2012 Q2 2016 SECTION LJIG - PRELJINA 42.2 KM - EUR 308 MIL.

ROAD ONGOING BELGRADE BYPASS HIGHWAY H1 2011 Q2 2016 SECTION 0 10.1 KM

ROAD ONGOING BELGRADE NORTHERN TANGENT H1 2011 H1 2016 20 KM SECTION OBRENOVAC - UB, LAJKOVAC - ROAD ONGOING CORRIDOR 11 H1 2014 H1 2017 LJIG USD 334 MIL.

ROAD ONGOING CORRIDOR 10 H1 2011 Q3 2016 (SECTION EAST) NIS-DIMITROVGRAD 87KM

ROAD ONGOING CORRIDOR 10 H1 2012 Q2 2016 SECTION VLADICIN HAN - VRANJE 31 KM - EUR 100 MIL.

ROAD PLANNED CORRIDOR 11 H2 2016 H1 2018 SECTION BEOGRAD - OBRENOVAC 25KM - EUR 300 MIL.

ROAD PLANNED CORRIDOR 11 H2 2016 Q2 2018 SECTION PRELJINA - POZEGA 30KM - EUR 300 MIL.

ROAD PLANNED MORAVA CORRIDOR POJATE - PRELJINA Q2 2017 Q2 2019 110KM - EUR 492 MIL.

ROAD PLANNED BELGRADE - ZRENJANIN MOTORWAY H1 2017 H1 2020

37 KM - EUR 600 MIL. INCLUDING ROAD PLANNED NOVI SAD - RUMA MOTORWAY Q3 2017 H1 2020 TUNNEL

ROAD PLANNED BELGRADE BYPASS HIGHWAY - SECTOR C Q4 2016 Q1 2019 22KM - EUR 250 MIL.

ROAD PLANNED BELGRADE INNER RINGROAD LOT1 Q3 2016 H2 2018 2KM INCLUDING RAILWAY UNDERPASS

KEY ONGOING AND PLANNED CIVIL ENGINEERING PROJECTS IN SERBIA

(PLANNED) PLANNED SEGMENT STATUS NAME LOCATION VOLUME START END

RAILWAY ONGOING PANCEVO-BELGRADE H1 2014 H2 2016 15KM - EUR 60 MILLION

BELGRADE, UNDER PROKOP TRAIN RAILWAY ONGOING BELGRADE RAILWAY NODE H1 2014 H2 2016 8 TRACKS AND GAUGE SWITCHES STATION

RAILWAY ONGOING CORRIDOR 10 H2 2015 Q3 2017 SECTION MALA KRSNA – VELIKA PLANA 30KM USD 15 MIL.

RAILWAY PLANNED NIS-DIMITROVGRAD H1 2016 H2 2017 106KM - EUR 120 MILLION

RAILWAY PLANNED STARA PAZOVA-NOVI SAD Q2 2016 H2 2018 45KM - EUR 300 MILLION

RAILWAY PLANNED BEOGRAD-BAR H1 2016 H2 2018 200KM - EUR 250 MILLION

RAILWAY PLANNED CORRIDOR 10 Q2 2016 H2 2017 VINARCI-ĐORĐEVO 15KM

RAILWAY PLANNED CORRIDOR 10 Q3 2016 H2 2017 VRANJSKA BANJA-RISTOVAC 17.7KM

RAILWAY PLANNED CORRIDOR 10 Q2 2016 H2 2017 BUJANOVAC-BUKAREVAC 13.8KM

RAILWAY PLANNED VALJEVO - LOZNICA Q2 2017 H1 2019 68KM - EUR 260 MILLION

OTHER TRANSPORT INFRA ONGOING ZEZELJ RAILWAY BRIDGE H1 2015 Q4 2016 NOVI SAD EUR 45 MIL. 474M

OTHER TRANSPORT INFRA ONGOING RAILWAY OVERPASS BRIDGE H1 2013 H2 2015 BELGRADE 606M

OTHER TRANSPORT INFRA ONGOING PREDEJANE TUNNEL H1 2013 Q2 2016 GRDELICA-CARICINA DOLINA 1.1 KM

KEY ONGOING AND PLANNED CIVIL ENGINEERING PROJECTS IN SERBIA

(PLANNED) PLANNED SEGMENT STATUS NAME LOCATION VOLUME START END

OTHER TRANSPORT INFRA ONGOING MANAJLE TUNNEL H1 2013 Q3 2016 CARICINA DOLINA-VLADICIN HAN 1.8 KM

OTHER TRANSPORT INFRA ONGOING BRANCICI TUNNEL H1 2015 Q2 2017 LAJKOVAC-LJIG 940M

OTHER TRANSPORT INFRA ONGOING RAILWAY BRIDGE 70M Q3 2015 Q2 2016 MALA KRSNA - VELIKA PLANA

OTHER TRANSPORT INFRA PLANNED OSTRUZNICA BRIDGE H1 2016 H2 2018 BELGRADE

OTHER TRANSPORT INFRA PLANNED INTERMODAL TEMRINAL H1 2017 H2 2019 BELGRADE 20MIL EUR

OTHER TRANSPORT INFRA PLANNED TUNNEL ON RUMA-NOVI SAD MOTORWAY H1 2017 H2 2020 FRUSKAGORA 1.9KM - EUR 100 MIL

OTHER TRANSPORT INFRA PLANNED TOPCIDER TUNNEL H1 2017 H2 2019 BELGRADE 2.2KM

OTHER TRANSPORT INFRA PLANNED NEW INTERNATIONAL HARBOUR PROJECT H1 2016 H2 2017 APATIN EUR 28 MIL

OTHER TRANSPORT INFRA PLANNED HARBOUR H1 2017 H2 2019 PANCEVO

OTHER TRANSPORT INFRA PLANNED BYPASS SECTOR C VINCA BRIDGE Q4 2016 H2 2019 BELGRADE 600M

OTHER TRANSPORT INFRA PLANNED BYPASS SECTOR C BUBANJ POTOK TUNNEL Q3 2016 H2 2019 BELGRADE 1300M

OTHER TRANSPORT INFRA PLANNED BYPASS SECTOR C LESTANE TUNNEL Q1 2017 H2 2020 BELGRADE 700M

OTHER TRANSPORT INFRA PLANNED BYPASS SECTOR C BUBANJ POTOK Q2 2017 H1 2020 BELGRADE RAILWAY TUNNEL 1600M

KEY ONGOING AND PLANNED CIVIL ENGINEERING PROJECTS IN SERBIA

(PLANNED) PLANNED SEGMENT STATUS NAME LOCATION VOLUME START END

OTHER TRANSPORT INFRA PLANNED BYPASS SECTOR C LESTANE Q2 2017 H2 2020 BELGRADE RAILWAY TUNNEL 900M

ENERGY, LONG PIPELINES ONGOING MK FINTEL VIND WIND FARM H1 2015 Q2 2016 KULA EUR 15 MIL.

ENERGY, LONG PIPELINES ONGOING KOSTOLAC B3 NEW CAPACITY TE H1 2015 H2 2019 KOSTOLAC USD 613 MIL.

ENERGY, LONG PIPELINES ONGOING KOSTOLAC DRMNO COAL MINE EXTENSION H1 2015 H2 2018 KOSTOLAC USD 98 MIL.

ENERGY, LONG PIPELINES ONGOING PANCEVO RAFINERY DEEP CONVERSION UNIT Q2 2015 Q2 2019 PANCEVO USD 300 MIL.

ENERGY, LONG PIPELINES PLANNED BULGARIA-SERBIA GAS INTERCONNECTION H1 2016 H2 2018 SOUTH SERBIA EUR 120 MIL - 180KM

ENERGY, LONG PIPELINES PLANNED COAL POWER PLANT H1 2016 H2 2018 DESPOTOVAC EUR 550 MIL

ENERGY, LONG PIPELINES PLANNED "BISTRICA" HYDRO POWER PLANT H1 2016 H2 2019 LIM EUR 600 MIL

ENERGY, LONG PIPELINES PLANNED "DJERDAP 3" HYDROPLANT H1 2020 H2 2024 DANUBE EUR 4 BLN

ENERGY, LONG PIPELINES PLANNED "STAVALJ" MINES AND POWERPLANT H1 2017 H2 2020 PESTER EUR 450 MIL.

ENERGY, LONG PIPELINES PLANNED WIND FARM 171 MW PHASE 129MW Q2 2016 H2 2017 CIBUK EUR 15MIL.

ENERGY, LONG PIPELINES PLANNED BIOMASS HEATING ENERGY PLANT Q3 2016 H2 2017 NOVI PAZAR

ENERGY, LONG PIPELINES PLANNED BIOMASS HEATING ENERGY PLANT Q1 2016 Q4 2016 KRUSEVAC EUR 23 MIL.

KEY ONGOING AND PLANNED CIVIL ENGINEERING PROJECTS IN SERBIA

(PLANNED) PLANNED SEGMENT STATUS NAME LOCATION VOLUME START END

ENERGY, LONG PIPELINES PLANNED WIND FARM - 102 MW Q1 2016 Q4 2016 PLANDISTE USD 225 MIL.

ENERGY, LONG PIPELINES PLANNED PARAFINE FACTORY Q3 2016 H2 2018 NOVI SAD EUR 130 MIL.

OTHER CIVIL ENGINEERING ONGOING KUMODRAZ UNDERGROUND RAIN COLLECTOR H1 2014 H2 2016 BELGRADE EUR 4 MIL.

OTHER CIVIL ENGINEERING ONGOING TASMAJDAN STADIUM RECONSTRUCTION H1 2011 H2 2016 BELGRADE EUR 6 MIL.

OTHER CIVIL ENGINEERING ONGOING SEWER COLLECTOR H1 2014 H2 2016 SUBOTICA EUR 5 MIL.

OTHER CIVIL ENGINEERING ONGOING WATER MANAGEMENT FACILITY H1 2014 H2 2016 NOVI SAD EUR 9 MIL.

OTHER CIVIL ENGINEERING ONGOING SALINAC, WATER FACTORY Q3 2015 Q3 2016 SMEDEREVO EUR 3.2 MIL.

OTHER CIVIL ENGINEERING PLANNED WATER FACTORY Q3 2015 Q4 2016 ZRENJANIN EUR 6.5 MIL.

OTHER CIVIL ENGINEERING PLANNED SKI CENTER H1 2017 H2 2019 GOLIJA MOUNTAIN EUR 19 MIL.

OTHER CIVIL ENGINEERING PLANNED VINCA WASTE MANAGMENT FACILITY Q4 2016 H2 2018 BELGRADE EUR 250 MIL.

OTHER CIVIL ENGINEERING PLANNED CAIR STADIUM RECONSTRUCTION Q1 2016 H2 2016 NIS EUR 5 MIL.

OTHER CIVIL ENGINEERING PLANNED WATER FACTORY 2 Q2 2016 H2 2017 SUBOTICA EUR 6 MIL.

OTHER CIVIL ENGINEERING PLANNED ATHLETIC STADIUM Q1 2015 Q4 2016 NOVI PAZAR EUR 1.3MIL

OTHER CIVIL ENGINEERING PLANNED WATER MANAGEMENT FACILITY H1 2016 H2 2018 VRANJE EUR 20MIL

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