"COVID-19 Expected to Cause Additional Decrease of Up to 10.1 Trillion Won in Construction Investment This Year"

Construction Investment Estimated to Decline an Additional 0.7~3.7%p This Year... May Decrease by Over 6% Compared to Last Year
Industrial Production Expected to Drop by 3.8 to 20.3 Trillion KRW, Employment to Fall by 21,000 to 111,000 Due to Reduced Construction Investment
"Expansion of Public Investment for COVID-19 Response, SOC Budget Needs to Increase by Over 5 Trillion KRW Next Year"

[Asia Economy Reporter Yuri Kim] Due to the impact of the novel coronavirus infection (COVID-19), construction investment is expected to decrease by up to 10.1 trillion KRW this year, leading to a reduction in industrial production value by more than 20 trillion KRW and a decrease in employment by 110,000 people. There are calls for expanding public investment to respond to COVID-19 and increasing the infrastructure (SOC) budget by more than 5 trillion KRW next year.

On the 21st, the Korea Construction Industry Research Institute estimated in its report titled "The Ripple Effects of the COVID-19 Crisis on the Construction Market and Countermeasures" that construction investment in 2020 will decrease by 1.9 trillion to 10.1 trillion KRW, industrial production value will decline by 3.8 trillion to 20.3 trillion KRW, and employment will drop by 21,000 to 111,000 people as induced effects.

The institute argued that the negative effects of economic activity contraction should be minimized through the multiplier effect of fiscal investment and infrastructure investment, which has a high labor income distribution rate. Specifically, supplementary budgets including public investment should be prepared to compensate for the approximately 10 trillion KRW decrease in construction investment expected this year, and the SOC budget should be increased by more than 5 trillion KRW next year, maintaining an expanded budget for more than three years thereafter.

In November last year, the institute projected at the "2020 Construction and Real Estate Market Outlook Seminar" that construction investment would decrease by 2.5% compared to the previous year. However, due to the outbreak of COVID-19, construction investment in 2020 is expected to decline by more than 6% compared to the previous year in a pessimistic scenario.

Tasks for expanding construction investment include ▲expanding medical and disaster response infrastructure ▲executing strategic public investment in special disaster areas ▲promptly advancing existing infrastructure policy projects ▲strengthening strategic investment for the future ▲discovering and implementing 'big projects.' To revitalize construction investment, efforts such as raising the scope of preliminary feasibility study target projects and expanding investigation agencies, improving the local finance investment project review system, activating private investment projects, and promoting private participation in urban regeneration projects are necessary.

Researcher Seungwoo Lee of the Korea Construction Industry Research Institute said, "If construction investment, which accounts for more than 15% of the gross domestic product (GDP), shrinks significantly amid the economic crisis caused by COVID-19, the difficulties of the national economy will inevitably increase. Immediate and effective policy measures are needed in a crisis, and after the current emergency measures, expanding construction investment can play a major role in full-scale economic recovery."

This content was produced with the assistance of AI translation services.