Construction sector to sign up double-digit decline in Q2

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Economists anticipate the building industry to endure a significant hit in the next quarter of 2020 in the Covid-19 pandemic.

OCBC Bank Chief Economist Selena Ling think it’ll come from several elements like the administration’s one-month circuit breaker steps, the rising infections/quarantines at overseas employees dormitories and the need shock from poor consumer and company optimism amid recessionary fears that may impact private sector demand for property.

According to empirical evidence, personal building activity — that made up roughly 40% of their contracts awarded last year — has become the major drag to the general building industry, stated Barnabas Gan, Economist in UOB.

“Since the building industry was categorized as a non-essential audience, the authorities circuit- breaker steps are predicted to become just another damaging blow to the industry,” said Gan.

“With the majority of the construction tasks being placed on hold for the large aspect of April, building expansion in Q2 2020 will probably contract by 15% year on year with downside risks.”

He noted the financial environment remains unclear past the first half of the season. “Possible situations incorporate the expansion of the circuit-breaker steps past the current specified period, which might weigh on the building sector.”

The magnitude of Covid-19 disease within foreign labor dormitories can also aggravate the labour shortage, particularly for the building industry.

For this, Gan expects the business to grow by only 0.7% year-on-year in 2020.

“There might be pent up construction momentum following the lull in H1 because of contractual obligations,” he explained.

Irvin Seah, Senior Economist in DBS, on the other hand, expects the business to contract by nearly 2% this past year.

In early January, the Construction and Building Authority forecasted total minimal construction output for this season to grow between $30 billion and $32 billion.

1 adviser expects tender costs to decrease after building action pickup again.

Ho Kong Mo, Managing Director at Surbana Jurong’s Threesixty Price Management, stated the international pandemic has affected ongoing construction functions, leading to the suspension of functions, labour disruption and shortage of materials provide, especially pre-cast concrete elements which are mostly from Johor Baru.

“As for jobs slated for the year that have yet to start, developers are most likely to bring a much more prudent wait-and-see strategy to keep monetary liquidity amid the present uncertainty in both the international and local market,” he explained.

As of 8 April, the World Trade Organization has expected international trade growth to fall by around a third this season.

“Construction requirement from the private sector will necessarily be negatively influenced and completions are very likely to be pushed by a second six to eight months,” said Ho.

In its business standpoint report, Threesixty Price Management anticipates contractors to adopt sensible cost management steps to save cash flow in the subsequent two decades in addition to earnest cost-cutting steps to lower prices, margin and cost.

Tenderers will also be expected to adopt a more careful and conservative position in bidding for new jobs this past year to mitigate the dangers.