Some cause for optimism?

As the World continues to deal with probably the worst economic depression in history, has a battle on it's hands with the H1N1 pandemic and is engaged in various on-going military conflicts, a review of the international economies in terms of construction opportunities may give some cause to be optimistic.

According to David Smith's article in the International Construction Review, and quoting research by IHS Global Insight, some sectors are proving to be more resistent to the spreading crisis.

Australia has huge natural resources and has benefited from demand from China. As China grows so does Australia. Even so, construction spending decelerated at the end of 2008 and business conditions are "subdued" and investors and banks are "cautious". The situtation in New Zealand is similar although the National Government has pledged to increase borrowing to fund major infrastructure projects.


Meanwhile, South Africa is a hive of industry. The 2010 World Cup is keeping the Industry busy with road and rail (including South Africa's first underground railway)projects. New coal power stations and massive housing programmes are being completed. The continued growth in urbanisation has led to increasing demand for new housing, water, roads, rail and power. Indeed the story across Africa has been pretty good news for Construction (especially African construction businesses who have been undertaking these schemes). Football stadiums, shopping malls, schools and clinics, together with very substantial housing programmes have been on-going in the last 5 years.

With the exception of Japan, the rest of Asia is looking relatively stable, especially China. The "big tigers" of construction outlook, according to the research, are China and India. Whilst China is experiencing their worst export crisis in 30 years the construction sector is expected to grow by 9.8% in 2009. India should grow at about 4.4%, someway behind China where the growth is largely due to its economic stimulus plans. Quoting experts at EC Harris, the article considers that China and India can "create their own economies" due to their resourses; power, fuel, minerals etc. Other countries are unable to self-start in the same way.

Economic stimulus plans appear to be seen as the way forward. The efforts by the new Government in the US as a "long-term, slow burn approach" again offers opportunities for the construction sector; building assets that have a legacy value such as highways, railways, powerstations, ports etc. Projects under public/private partnersips that have been shelved are reemerging as public-funded schemes.

The picture in some parts of the world are less than positive. Residential construction is predicted to be the slowest to recover, having declined about 13% worldwide in 2009. Western Europe, especially the UK, Spain and Germany have seen the heaviest losses having experienced their housing bubbles bursting. The downturn generally in Western Europe is hurting Eastern Europe because a lot of the credit which was funding residential construction projects has dried up.

An area for optimism is in infrastructure which is due to the large stimulus packages. However, in countries such as the UK facing its public borrowing crisis, it is likely that there will be cuts in public spending on social housing, school buildings, hospitals etc. The Olympics still go ahead. But what is beyond that?

TOTAL CONSTRUCTION BY REGION / 2008-2013 (Source: IHS Global Insight)
North America 1.5%
South America 3.1%
Middle East & Africa 3%
Asia 5,3%
Eastern Europe 2%
Western Europe -1.6%
World 2.1%

References used

www.iconreview.org
http://www.globalinsight.com/Construction