2020/04/07 Global Data- Western Europe Construction Output Forecasted to Contract as Coronavirus Spread Causes Severe Disruption
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Western Europe Construction Output Forecasted to Contract as Coronavirus Spread Causes Severe Disruption
With economic conditions set to deteriorate in the coming months, as much of Western Europe has been placed under strict lockdown, the construction industry is set to face severe disruption. Leading data and analytics company GlobalData has revised its forecast for the Western Europe construction industry, with a contraction of 1.9% expected.
Prior to the outbreak of the coronavirus (COVID-19), GlobalData had predicted that there would be an acceleration in the pace of growth in the global construction industry, to 3.1% from 2.6% in 2019. However, given the severe disruption in China and other leading economies worldwide following the outbreak, the forecast for growth in 2020 has now been revised down to 0.5%.
The current forecast assumes that the outbreak is contained across all major markets by the end of the second quarter, following which, conditions would allow for a return to normalcy in terms of economic activity and freedom of movement in the second half of the year. However, there will be a lingering and potentially heavy impact on private investment owing to the financial toll that inflicted upon businesses and investors across a wide range of sectors.
GlobalData’s report, ‘Global Construction Outlook to 2024 - COVID-19 Impact’ reveals that the commercial sector, in particular tourism and hospitality, are likely to experience a sharp downturn in the coming months. Projects in this sector are likely to come to a complete halt due to a lack of financing across Western Europe. Residential construction will also struggle, as the expected increase in unemployment and household debt across the region are likely to severely stifle demand.
Moustafa Ali, Economist at GlobalData, comments: “The economic outlook for the region has significantly weakened in the past month, according to market consensus. The region is set for a recession in the first half of the year. Major markets such as Germany, France, Italy and the UK are all set for negative growth in 2020.”
Governments and public authorities will likely be aiming to advance spending on infrastructure projects as soon as normality returns so as to reinvigorate the industry. This will be spread across all areas of transport infrastructure and energy and utilities. With interest rates falling to record lows, borrowing costs will be at a minimum, but the success of government efforts to spend heavily on infrastructure will be dependent in part on their current financial standing. Moreover, with most governments prioritizing cash hand-outs, particularly to the economically weaker segment, their capability to invest in the infrastructure segment is likely to be constrained, especially in countries with high debts.