The pace of expansion in the global construction industry steadied in 2016, standing at 2.4%, but there will be an improvement in the next five years, with growth averaging 2.8%, according to the Global Construction Outlook 2021, a new report from Timetric's Construction Intelligence (CIC).
According to the CIC's lead economist, Danny Richards, the pick-up will reflect trends in the wider economy; in the forecast period (2017–2021), the world economy is set to expand by close to 3% per year on average. However, there a number of key risks; most notable is how the Chinese authorities will rein in credit growth and manage the ensuing economic slowdown, and how investors in advanced economies will respond to the shift towards monetary policy normalization, particularly in view of the likely pick-up in inflation as commodity prices bounce back.
In real value terms (measured at constant 2010 US$ exchange rates), global construction output reached US$8.8 trillion in 2016 – up from US$7.9 trillion in 2012 – and will stand at US$10.1 trillion in 2021. The value of construction activity in the emerging world (at real 2010 US$ exchange rates) surpassed that of advanced economies in 2014, and this difference will continue to widen. In 2012, emerging markets accounted for 46.7% of global output – a share that will rise to 52.8% by 2021.
Asia-Pacific will continue to account for the largest share of the global construction industry, given that it includes the large markets of China, Japan and India. However, the pace of growth will slow, given the relative sluggishness in China’s construction industry, the expansion of which will be undermined by the glut of new residential property. The emerging markets of Southeast Asia, notably the Philippines, Malaysia and Indonesia, will invest heavily in new infrastructure projects, supported by private investment. The US construction industry is set to continue to post relatively solid growth over the forecast period, supported by the residential sector.
Reflecting the extent of the downturn in the US in real terms, the construction industry will just be returning to pre-crisis highs by 2021. Canada’s construction industry has been sluggish, and it will prove difficult over the forecast period to generate fast growth momentum. However, investment in the New Canada Building Plan will provide support. Reflecting the extent to which the industry slumped after the financial crisis, by 2021 the value of construction output in Western Europe will stand at US$2.15 trillion (in real 2010 US$ terms), which is still below the US$2.25 trillion recorded in 2008. Over the forecast period, most markets that will recover to spending levels above the pre-crisis highs, but this will not be the case in France, Italy, Spain, Greece or Portugal.
The Eastern European construction industry will be relatively weak over the forecast period. This primarily reflects the troubled state of the Russian economy, weak commodity prices and political and economic uncertainties. Furthermore, sharp contractions were recorded in Poland, Hungary and the Czech Republic, owing to delays in the disbursement of EU funding.
Construction activity in Brazil has been weak in recent years, following a sustained recession which resulted in a deteriorating business environment, weak investor confidence and reduction in construction activity. Weak commodity prices will constrain investment in new mining-related construction activity. However, Chile, Peru and Colombia will post solid growth over the forecast period, supported by the need for housing developments and improved infrastructure.
Although the Middle East and Africa will have the best-performing construction industry of any region in the world, the pace of growth will be relatively subdued compared to the rampant expansion recorded during the early years of the review period (2012–2016). Efforts to shift from a reliance on oil will involve investment in infrastructure and non-oil industrial and commercial zones, which will drive construction activity in many countries in the Middle East and North Africa.
About this report
This information is taken from the Timetric report: ‘Global Construction Outlook 2021'. To find out more information about the report, please contact us at firstname.lastname@example.org.