The construction industry in India, China, Vietnam, Indonesia and other South East Asian countries is thriving and appears to be on a sustained growth cycle for the next two to three years, the GDP forecast for these countries ranges between 5.5% and 7%. There will continue to be numerous construction bidding opportunities in 2019 and beyond.
India will continue to be the leader of the Asian economies in 2019. China appears to be slowing down and the potential trade war with the US is a fight it cannot win, a compromise must be reached with the US. Foreign investment is pouring into India as major US, European and Japanese companies recognize India as a future major growth country, look for this trend to continue in the 4th Q of 2018 and well into 2019 and beyond.
India overtook China and the USA with the highest direct foreign investment in 2018, its’ economy is forecast to grow by more than 7% in the 4th Q of 2018. The Indian construction sector is set to see strong and robust growth in 2019, inflation is somewhat high at 4.5% and is forecast to trend upwards in the next six to nine months to more than 5%. Civil Engineering, Infrastructure and Commercial projects such as, transportation, ports, railways, low cost housing, schools, hospitals, manufacturing, fertilizer, petro-chemical, gas facilities and power plants are moving the Indian economy forward. Unemployment in India is 6.3%. Across the board, engineering and construction activities are now ongoing in all regions of India. Infrastructure, power, industrial, manufacturing and residential construction are the five main categories that are propelling the Indian construction market, look for this activity to continue for at least the next three to five years. India will be the frontrunner of the “Asian Tiger” economies. Infrastructure accounts for between 50% and 70% of India’s construction sector, this will possibly increase due to the Indian Governments recent proclamation to invest and improve highways, electrical transmission systems, railways and other forms of transport. Indian Engineering and Construction worker wage rates have increased between 5% and 10% in 2018, look for this trend to continue in 2019. India’s construction sector employs more than 30 million construction professionals and construction workers, it ranks as one of the major industries employing millions of individuals similar to the Indian Railway. The Indian construction industry continues to expand, this growth is sustained by India’s evolving economy, consumer spending, foreign direct investments (FDI) and higher government spending on large and mid-sized infrastructure projects. Construction industry growth is expected to remain strong over the next three to five years, as a result of the government’s undertaking to augment India’s dilapidated infrastructure.
China and South Korea’s share of global construction will continue to expand in the next two or three years as these two countries EPC firms pursue Infrastructure, Energy, Oil & Gas projects around the world.
The Chinese economy is very reliant on exports, 15% to 20% of its exports go to the US. China sold $500 + billion in goods and services to the US in 2017, the US sold $135 billion in goods and services to China, a trade gap of $375 billion. China’s Government has recently decided to confront three major domestic problems in the next five years, (1) reduce poverty, (2) reduce pollution and (3) reduce domestic debt. The continuing probability of a trade war between the US and China is a distinct possibility with the US continuing to ratchet up its rhetoric on this issue and the Chinese responding in a similar way on this topic. China’s GDP is forecast to be 6% in the 4th Q of 2018. Inflation will be in the 2.1% to 2.4% range and unemployment is forecast to be 3.8% at the conclusion of 2018. Chinese EPC companies have improved their share of the global EPC market from approximately 6% in 2008 to close to 20% in 2018, look for this percentage to grow in 2019 and beyond in the coming years as Chinese EPC firms aggressively chase international construction work especially in Africa, Asia and North and South America. The Chinese private property market is still overvalued by at least 25% to 35% according to industry experts; this has impacted the spending habits of the Chinese consumer and will have a knock-on effect for the Chinese construction sector in 2019.
Continuing industrialization coupled with a growing population are the main drivers fueling growth in China. China is striving to re-calibrate its’ economy to be more domestic and environmentally sustainable model. Chinese bulk and engineered material prices are flat or increasing by only 1% to 2% per year, labor costs are a different matter, wage rates for Construction Professionals and Skilled and Unskilled Workers are increasing between 5% and 10% per year in some of the major coastal cities.
China and India’s border dispute has risen to an uncertain level, this could seriously impact both the economies of both countries and the region if this situation is not resolved peacefully. China’s engineering and construction (EPC) sector will continue to grow in the next two to three years, however the pace of growth will be more subdued than the previous five years.
Japan’s recently announced Government stimulus policy has not appeared to work. Japan’s GDP is forecast to grow in the disappointing 1.6% to 1.9% range in the 4th Q of 2018. The Japanese unemployment rate is forecast to be 2.5% for the next six months, Japanese inflation is forecast to be in the 1.1% in the 4th Q of 2018. Japan is perhaps the engineering and construction leader on foundations, building and infrastructure construction design, methods and practices to minimize earthquakes and tsunami events, which seem to occur on a regular basis in Japan. Japan will host the 2020 Olympics, the forecast of funds to be spent on new stadiums, highways and other infrastructure facilities is forecast to be in the $4 to $6 billion range in the next 2 to 3 years.
South Korea’s 2019 GDP is forecast to see 2.6% to 3.2% growth, inflation will be in the 1.3% to 1.8% range and unemployment is forecast to be 3.3% to 4.1% in 2019. The South Korean construction sector is experiencing decent growth. Consumer confidence, business investment in manufacturing facilities, Government funding of infrastructure projects and a belief that the North Korean threat will be resolved is the reason for the positive situation.
The Indonesia construction sector is performing especially well in and around Jakarta, GDP is forecast to grow in the 5.2% to 5.7% in 2019. Vietnam and Singapore are all expected to see decent growth in the 3.8% to 5.7% range in 2019. Malaysia’s construction sector will continue to thrive in 2019, some large office buildings, shopping malls, hotels, roads, oil and gas facilities together with rail facilities are driving this growth.
Other potential Asian construction growth markets include, Thailand, the Philippines and Laos all countries are demonstrating positive construction growth potential as we move into 2019 and beyond.
China and South Korea’s share of global construction will continue to expand in the next two or three years as these two countries EPC firms aggressively pursue Infrastructure, Energy, Oil & Gas projects around the world.