Latin America’s construction industry expected to decline in 2019, says GlobalData

Weaker economic activity, external risks arising from slower global growth amid rising protectionism, are limiting the expansion of the region’s construction industry.

Construction industry, Latin America, GlobalData, Global Construction Outlook to 2023, Dariana Tani, Argentina, Brazil, Declining construction output, Mexico, President Andrés Manuel López Obrador, Pemex, Colombia, Venezuela, Peru, Chile

The construction industry in Latin America is expected to decline by 0.2% in real terms in 2019, following a slight increase of 0.4% in 2018. The market is projected to recover to an annual average of 3% between 2020 and 2023, says GlobalData, a leading data and analytics company.

GlobalData’s latest report, ‘Global Construction Outlook to 2023’, reveals that weaker economic activity, elevated domestic policy uncertainty in some large economies, external risks arising from slower global growth amid rising protectionism, increased global financial volatility, and worsening prospects for commodity prices are limiting the expansion of the region’s construction industry.

Dariana Tani, economist at GlobalData, comments: “In Argentina, the increasingly likely return of the left to power after October’s presidential election and the associated negative effects it will have on investment, economic activity and market confidence has extended last year’s deep recession. GlobalData now expects the Argentine construction industry to contract by -6% in 2019 compared to an increase of just 0.2% in 2018.”

Meanwhile, in Brazil, a sluggish economic recovery and policy uncertainty over the timing and scope of long-needed pension reforms continue to undermine business confidence, with construction output declining by 0.5% this year.

Tani continues: “In Mexico, the government’s cancellations and suspensions of a number of major infrastructure projects earlier this year has led to weaker investment while recent measures by President Andrés Manuel López Obrador to shore up Pemex, the struggling state oil company, have prompted large budget cuts across many governmental departments. The construction industry is now forecast to fall by 1.9%, after increasing by 0.6% in 2018.”

In Colombia, tighter fiscal conditions amid ongoing migration flows from Venezuela, excessive bureaucracy, and risk arising from weaker global growth and lower oil demand are limiting the recovery of the Colombian construction industry. Growth is now forecast to register 0.4% in 2019, pushing the bulk of the sector’s expected recovery into 2020.

Tani concludes: “Robust economic growth in Peru and Chile, together with rising infrastructure investment, is expected to counter the decline in the region’s construction industry in 2019. In Peru, for example, ongoing reconstruction works and increasing investment, especially in infrastructure and mining projects - together with the continuity of programs such as the Mivivienda Verde bond and the Mi Alquiler bond - will help the country’s construction growth to post 5% this year, down slightly from 5.4% in 2018. In addition, the recently launched programs to revive Chile’s economy, which has been hit by weakening global conditions, including programs such as the ‘Chile on Rails’ and the ‘Economic Stimulus Agenda’ will provide a boost to the country’s construction industry, with growth now expected to increase to 3.7% in 2019.”

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