PH construction sector seen to contract 9.8% in 2020

August 18, 2020 | By: The Manila Times

THE country’s construction sector is seen to suffer a 9.8-percent decline this 2020 amid the government’s efforts to curb the coronavirus disease 2019 (Covid-19) pandemic.

“We have turned bearish on the growth of the Philippines’ construction sector in 2020, and we now expect the sector to experience a full-year contraction of 9.8 percent [year-on-year] in real terms,” Fitch Solutions said in its report released Thursday.

The forecast was a reduction of 12.7 percentage points from its previous forecast of an expansion of 2.9 percent.

The bleak forecast of the Fitch Group unit was due to the “dismal” second quarter performance of the local economy, and the raging health situation brought by the pandemic.

The economy slipped into recession with the gross domestic product dropping to 16.5 percent in the period, dragging every sector, including the construction industry.

The construction sector witnessed a 33.5-percent contraction in April to May period due to strict quarantine controls implemented to lessen the virus’ blow.

“The decline will be felt across both the infrastructure and building construction sector. The infrastructure sector, often seen as an important engine of growth, is expected to take a backseat throughout the rest of 2020, and we expect the sector to post a decline of 7.8 percent y-o-y in real terms, down 10.6 percentage points from our previous forecast,” Fitch Solutions said.

This, as the unit expects the Duterte administration to “face increasingly tighter financial constraints as the pandemic drags on.”

“This will see more funds channeled away from infrastructure spending towards other immediate concerns such as supporting the labor market and households through handouts and wage subsidies,” it added.

Fitch Solutions, however, said the construction sector will bounce back in 2021 if the government can win its battle against the pandemic.

“We have made an upward adjustment to our growth forecasts for real growth of the Philippine construction industry in 2021 to 9.5 percent y-o-y, with the major assumption that the country is able to contain the spread of Covid-19 and that normal construction activity can be resumed,” the unit said.