Limited growth for Brazilian construction industry

In real terms, there was a contraction in the Brazilian construction industry’s output value, from US$226.3 billion to US$214.9 billion in 2014. The main cause of this decline was a large budget deficit and the implications of ‘Operation Lava Jato’, implemented to control the country’s corruption scandal. This lead to a delay in the construction of several infrastructure projects, along with weak business confidence, which affected the demand for construction activity in 2014.

However, construction activity in the county is likely to increase with the 2016 Olympic Games in Rio de Janeiro. This is predicted to lead to a slight growth in the industry’s output value, in real terms, increasing to US$215.1 billion by the end of 2015. Growth prospects over the next five years however will remain limited, with unstable economic conditions having a negative effect on the country’s construction industry, which is expected to decline in value in real terms from US$214.9 billion in 2014 to US$204.1 billion in 2019.

Residential construction was the largest market in the entire construction industry throughout the review period, holding roughly a 31% share. Government efforts to offset the country’s housing deficit, low interest rates and expanding middle class population, supported the market during the review period, which posted a nominal compound annual growth rate of 14.9%. Over the forecast period, the market is expected to remain the largest, with a share of 29.6% in 2019.

Infrastructure construction was the second-largest market in the Brazilian construction industry, accounting for 28.5% of its total value in 2014. The market will be supported by the nation’s hosting of the Olympic Games, which will require stadia, transport infrastructure, hotels and other related infrastructure. It was necessary for the Brazilian government to prioritise infrastructure development as a key area of investment, to enable the country to handle the high volume of tourists expected to accompany the games.

Adapted from press release by Rebecca Bowden

Read the article online at: https://www.worldcement.com/the-americas/21102015/limited-growth-for-brazilian-construction-industry-815/