Projection premises containment of pandemic by the end of Q2; predicts marginal growth in emerging markets
The global construction industry could narrowly avoid shrinkage in 2020, with a growth forecast of just 0.5%, according to a new report by GlobalData.
The global research and analytics company had earlier predicted a growth of 3.1% for the sector, up from 2.6% recorded in 2019. This was before the outbreak of Covid-19. Downgrading the forecast to 0.5%, GlobalData said the new forecast assumes the containment of the Coronavirus in major markets by the end of the second quarter, failure of which would necessitate further revision.
The new forecast also assumes a return to normal activity in terms of the economy and freedom of movement in the later part of this year, post containment.
According to the new forecast by GlobalData, the Western European market is expected to contract by 1.9% this year due to “severe disruption”. Particularly hit would be commercial construction and projects for the tourism and hospitality sectors.
Differentiating between the emerging and advanced markets, the report projects construction growth figures in the former to come down to 2% this year before rising to 5% in 2021. The advanced economies, meanwhile, can expect a contraction of 1.5% this year, with a growth of 2% projected for the next.
Private investment will be the worst hit in the crisis this year and going forward, said the report, with a lingering financial impact on businesses and investors across several sectors.
“Governments and public authorities will likely be aiming to advance spending on infrastructure projects as soon as ‘normality’ returns so as to reinvigorate the industry. This will be spread across all areas of transport infrastructure and energy and utilities,” said the report.
“With interest rates falling to record lows, borrowing costs will be at a minimum, but the success of government efforts to spend heavily on infrastructure will be dependent in part on their current financial standing.
“Moreover, with most governments prioritising cash hand-outs, particularly to the economically weaker segment, their capability to invest in the infrastructure segment is likely to be constrained, especially in countries with high debts.”