ASIA (Asian counties are projected to see 5.4% to 5.6% GDP growth for the balance of 2019):
Asian economies & their construction sectors in India, China, Malaysia, Indonesia, Singapore, Philippines, Vietnam & Bangladesh are performing much better than the rest of the world. These countries & other Southeast Asian countries are to some extent booming & appear to be on a sustained growth cycle for the next two to three years, the GDP forecast for these countries ranges between 5% & 6.5%. There will continue to be numerous construction bidding opportunities in 2019 & beyond. China’s engineering & construction sector is starting to see a slowdown from the growth period experienced seen three or four years back.
China in 2020 will be focusing on assisting its less developed rural provinces such as Gansu, Qinghai & Xinjiang. Look for a gradual slowdown of highways, airports, rail links & a greater push on low cost housing, schools & regional hospitals in these western provinces. The Hong Kong Government has delayed an unpopular extradition law. The current standoff between police & demonstrators is Hong Kong’s most severe political crisis in 20 years. China has some challenges going into 2020, Uighurs / Muslim separatist’s protests & unrest in China’s western province, Hong Kong demonstrations & unrest, US / China trade issues & the ongoing South China Sea exclusion zone.
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 & environmentally sustainable model. Chinese bulk & engineered material prices are flat or increasing by only 1% to 2% per year. Labor costs are a different matter, and wage rates for Construction Professionals & Skilled & Unskilled Workers are increasing between 5% & 10% per year in some of the major coastal cities. China’s engineering & 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.
China’s engineering / construction market is forecast to see slower growth in 2019. China’s inflation rate is forecast to be 1.9% to 2.5% for the remainder of 2019. The Chinese GDP continues to trend downwards to 5.9% to 6.2% for the remainder of 2019. China’s overall industry unemployment rate in 2019 is forecast to be 3.6% to 3.9%, the construction industry is to some extent higher ranging between 5.3% & 5.8%.
The Chinese economy is very reliant on exports, 15% to 20% of its exports go to the US. China sold $500 + billion in goods & services to the US in 2018, the US sold $135 billion in goods & 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 & (3) reduce domestic debt. The continuing possibility of a trade war between the US & China & is a distinct possibility with the US continuing to ratchet up its rhetoric on this issue & the Chinese responding in a similar way on this topic.
It is estimated that each year more than 10 million rural based individuals from mainly the western regions are migrating to China’s major cities, these individuals are looking for higher paying jobs. Look for this situation to continue for at least the next five years, this will continue to put a strain on the support services of these major cities. China’s economy appears to be slowing down & the potential trade war with the US is a fight it cannot win, a compromise must be reached with the US. The Chinese Government may be waiting to see who wins the 2020 US Presidential election.
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 & beyond in the coming years as Chinese EPC firms aggressively chase international construction work especially in Africa, Asia & North & 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 & will have a knock-on effect for the Chinese construction sector in 2019.
India’s construction sector is forecast to see steady / continuing growth for the rest of 2019. India’s inflation rate is forecast to be 2.8% to 3.2% for the remainder of 2019. India’s GDP is continues to be robust at 5.9% to 6.2% for the remainder of 2019. India’s overall industry unemployment rate in 2019 is forecast to be 6.8% to 7.2%, the construction industry unemployment rate is to some degree higher ranging between 7.5% & 9.5%.
India is on track in the next 3 to 5 years to be one of the leading construction markets. The Indian engineering & construction industry is going to double in size by 2025. India is now the new China, numerous US / European & Japanese manufacturing companies are focusing on India to establish manufacturing facilities in India, look for this trend to continue for the next 5 years at least. Foreign investment is pouring into India as major US, European & Japanese companies recognize India as a future major growth country, look for this trend to continue in 2019 & beyond.
A rapid expansion of India’s major cities & towns in the next five to ten years is forecast to significantly expand the population of these cities & towns. This will in turn create huge opportunities for Indian Contractors, Architects, Engineers, EPC / CM firms to complete new & existing roads, housing, railways, ports, schools & a host of other facilities that will be needed to support this unprecedented growth. The question is does India have the necessary Contractors, Architects, Engineers, EPC / CM firms to complete this task? At this time, it is questionable that this effort can be achieved, with India only have one really major EPC company.
India overtook China & the US with the highest direct foreign investment. The Indian construction sector is set to see strong & robust growth in 2019 & 2020. Civil Engineering, Infrastructure & Commercial projects are moving the Indian economy forward. Across the board, engineering & construction activities are ongoing in all regions of India. Infrastructure, power, industrial, manufacturing & 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% & 70% of India’s construction sector, this will possibly increase due to the Indian Governments recent proclamation to invest & improve highways, electrical transmission systems, railways & other forms of transport. Indian Engineering & Construction worker wage rates have increased between 5% & 10% in 2018, look for this trend to continue for the remainder of 2019.
India’s construction sector employs more than 30 million construction professionals & 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) & higher government spending on large & 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.
Japanese construction activity, for the most part, is focused on new hotels, shopping centers, housing & the 2020 Olympic facilities. Japan’s recently announced Government stimulus policy has not appeared to work. Japan’s GDP is forecast to grow in the disappointing 0.7% to 0.9% range in 2019. Japanese unemployment rate is forecast to be 2.7% for the next six months, Japanese inflation is forecast to be in the 0.8% in the 2nd half of 2019. Japan is perhaps the engineering & construction leader on foundations, building & infrastructure construction design, methods & practices to minimized earthquakes & 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 & other infrastructure facilities is forecast to be in the $4 to $6 billion range in the next year.
The breakdown of the US – North Korea summit in February is a setback, hopefully a follow up summit can be arranged in the next 3 to 6 months to keep the nuclear weapons eradication talks back on track. South Korea’s 2019 GDP is forecast to see 1.5% to 1.8% growth, inflation will be in the 0.5% to 0.8% range & unemployment is forecast to be 4.2% to 4.5% in 2019. The South Korean construction sector is experiencing moderate growth. Consumer confidence, business investment in manufacturing facilities, Government funding of infrastructure projects & a belief that the North Korean threat will be resolved is the reason for the positive situation.
China & South Korea’s share of global construction will continue to grow in the next two or three years as these two country’s EPC firms pursue Infrastructure, Energy, Oil & Gas projects around the world.
The Indonesia construction sector is performing exceptionally well in & around the Jakarta region, GDP is forecast to grow in the 4.9% to 5.2% in 2019, inflation is reasonably low between 2.6% & 2.9%, Indonesia unemployment is forecast to be 4.9% at the end of 2019.
Vietnam & Singapore are all expected to see decent GDP growth in the 5.5% to 6.5% range in 2019. Malaysia’s construction sector will continue to thrive in 2019. Some large office buildings, shopping malls, hotels, roads, oil & gas facilities together with rail facilities are driving this growth.
Construction activity in the remainder of 2019 & going into 2020 is expected to be robust in some of the emerging markets such as Bangladesh, the Philippines, Thailand, Cambodia & Laos