THE IMPACT OF MACROECONOMIC FACTORS ON THE PERFORMANCE OF THE CONSTRUCTION SECTOR IN LITHUANIA

Abstract

The construction sector is closely related to the economic situation in the country. The main products of this sector are residences, business structures. Demand for these products is highest when the economic situation in the country is good, but when the economy slows down, the demand for these products also falls. This is because when the economic situation is good the population has spare money, loans are cheaper and the risk of job loss is low. This leads to an increase in the rate of growth of residential construction, as there is more demand for this product. Similarly, businesses are expanding due to increased sales, higher demand, and the resulting increase in non-residential construction. Therefore, in order to maximize the performance of the Lithuanian construction sector, it is important to keep an eye on the macroeconomic environment and to understand when the economy offers opportunities and when it brings threats. To this end, the construction sector and the macroeconomic environment are analyzed, the theory of economic cycles and the impact of macroeconomic factors on the construction sector is analyzed, and an empirical study of the impact of macroeconomic factors on the construction sector is carried out. An analysis of the scientific literature on business cycles and the main macroeconomic factors that affect the performance of the construction sector. Economic cycles are closely linked to construction performance. The boom or peak phases of the economy provide opportunities for the construction sector, while the recession and crisis phases bring threats. Understanding potential threats or opportunities maximizes performance, and this understanding requires an analysis of macroeconomic factors. Therefore, the main macroeconomic factors to be taken into account when analyzing both the changes in economic cycles and the factors that directly affect the construction sector are identified. The main factors identified are: aggregate demand, employment levels, corporate profits, import levels, interest rates, gross domestic product. However, it is also very important to analyze the existence of a real estate bubble, especially in the construction sector. An empirical study has been carried out to analyze the relationship between the identified macroeconomic factors and the construction sector in Lithuania. For this purpose, the Eviews software is used to construct a correlation matrix, regression models, find the elasticity coefficient and forecast.