"Global Construction Market Growth Forecast Revised Upward... Key Factor Is Economic Recovery"

This year, a revised (upward) forecast predicts that the global construction market will grow at a rate of over 4%.

Phase 1 construction, including the presidential palace, is underway in Nusantara, East Kalimantan Province on the island of Borneo, where Indonesia's new capital city is being established. / Photo by Noh Kyung-jo

According to the Overseas Construction Association Policy Support Center on the 14th, the global market research firm IHS Markit projected last month that the global construction market size this year will grow by 4.7% compared to the previous year, reaching $14.1019 trillion. This is a 1.9 percentage point increase from the forecast of 2.8% released in January this year.

The growth factors cited include ▲public infrastructure investment policies of various countries ▲improvements in the order environment in Middle Eastern oil-producing countries ▲and the gradual normalization of the construction market due to the transition to an endemic phase of COVID-19.

By region, growth rates in Latin America (8.2%), where there is high demand for investment in underdeveloped infrastructure, and the Middle East (8.0%), where the order environment has improved based on oil money, are expected to exceed the average. Asia and Europe, which account for 49.1% and 22.8% of the total market respectively, are estimated to grow by 5.0% each. Africa (4.7%) and North America & Pacific (1.8%) are expected to have below-average growth rates.

In the Middle East, Saudi Arabia’s state-owned oil company Aramco’s net profit increased about sevenfold from $6.6 billion in Q2 2020 to $48.4 billion in Q2 last year. Accordingly, the capital expenditure (CAPEX) plan was raised from $40 billion to $50 billion, and mega project orders are expected.

In Asia, market growth is expected to be driven by expanded infrastructure investment for economic stimulus in China and large-scale projects focused on transportation infrastructure and power generation in the Association of Southeast Asian Nations (ASEAN). Indonesia is expected to grow at an average annual rate of 9.4% (2021?2026), and Vietnam is expected to grow by 11.5% compared to the previous year.

However, IHS Markit sees growth-inhibiting factors mixed in, such as inflationary pressures and geopolitical risks amid the global economic recession. In fact, although the government has formed a joint public-private “One Team Korea Order Support Group” aiming for overseas construction orders of '35 billion + α dollars' this year and is actively working on the front lines, the trend has not shifted to a full-scale increase in performance.

According to the association, overseas construction order performance in the first quarter of this year was $6.17874 billion, down 8% from $6.618906 billion in the same period last year. The gap has since widened, with the current cumulative order amount at $7.96383 billion, showing a year-on-year change rate of -22%. An association official said, “Selective bidding participation by domestic construction companies also has an impact, but we need to watch whether the global economy recovers and whether oil-producing countries increase their order volumes as expected.”

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