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GlobalData: Growth in construction output in North-East Asia to slow to 0.9%

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World Cement,

Led by a recovery in the Chinese construction industry, the output for North-East Asia improved in the second quarter of 2020 following a dismal first quarter. However, despite the improved performance in most of the countries across the region, growth in construction output in the region has been revised down to 0.9%. Although this marks a sharp deceleration due to COVID-19 containment measures, the industry will post an expansion in 2020 that reflects its resilience and also the relative successes of governments in the region to manage the crisis without significantly impacting the industry, according to GlobalData, a leading data and analytics company.

The North-East Asia region accounts for the largest share of total global construction output by value and despite being the original epicentre of the virus, the region has performed better in controlling the pandemic as compared to other regions across the world. Assuming that a widespread second wave of infections is avoided, that would result in a repeat of the recent lockdowns in the region, output will rise at 5.7% in 2021 before averaging a more sedate 3.7% over 2022 – 2024.

Dhananjay Sharma, Construction Analyst at GlobalData, says: “In the short-term, growth in the region will be hampered by cautious private investors, with investments in commercial, industrial, institutional (excluding healthcare) and residential segments bearing the brunt. Weaker global macroeconomic conditions and the uncertain economic scenario are likely lead to postponements or cancellations of projects in these sectors.”

China is expected to post positive growth in 2020, as the recovery since March 2020 has taken firmer roots, supported by investments in infrastructure. Investment activities started picking up in March, before accelerating in April, with the latest data showing further progress in investments in both fixed assets and real estate segments. Despite sharp contractions in the first two months of the year, investments in real estate increased by 4.6% in the first eight months, while investments in fixed assets during the same period is now down by a marginal 0.3%.

In South Korea, the construction industry was already weak, following two years of contraction, averaging 2.6% in 2018 – 2019. Although there were signs of recovery in the first quarter, the industry has regressed since then, owing to weaker macroeconomic conditions both internally and among its major trading partners. Japan’s construction industry too has been adversely affected by COVID-19, with GlobalData now expecting the industry to contract by 4% in 2020. Assuming the successful containment of COVID-19 outbreak, the industry is expected to recover in 2021, although growth is still likely to remain subdued posting an annual average of 1.2% over the period 2021 – 2024.

Sharma concludes: “Over the forecast period, investments in new age infrastructure including 5G networks, data centers, renewable energy and high-speed trains are expected to drive growth across the region. But growth will be slower as compared to earlier period, reflecting the maturing of Chinese infrastructure and slowing pace of growth in infrastructure investment.”

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China cement news Construction news