ASIA (Asian counties are projected to see 5.4% to 5.6% GDP growth for the balance of 2019):
Asian economies and their construction sectors in India China, Malaysia, Indonesia, Singapore, Philippines Vietnam and Bangladesh are performing much better than the rest of the world. These countries and other South East Asian countries are (to some extent) booming and appear 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.
A rapid expansion of India’s major cities and towns in the next five to ten years is forecast to significantly expand the population of these cities and towns, this will in turn create huge opportunities for Indian Contractors, Architects, Engineers, EPC / CM firms to complete new and existing roads, housing, railways, ports, schools and 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’s EPC sector is forecast to see steady / continuing growth in 2019. India’s inflation rate is forecast to be 2.8% to 3.2% for the remainder of 2019. India’s GDP continues to be robust at 6.9% to 7.2% for the remainder of 2019. India’s overall industry unemployment rate in 2019 is forecast to be 6.8% to 7.3%, 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 and construction industry is going to double in size by 2025. India is now the new China, numerous US / European and 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. 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 2019 and beyond.
India overtook China and the USA with the highest direct foreign investment, the Indian construction sector is set to see strong and robust growth in 2019 and 2020. Civil Engineering, Infrastructure and Commercial projects are moving the Indian economy forward. 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 is 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 for the remainder of 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’s engineering / construction market is forecast to see slower growth in 2019. China’s inflation rate is forecast to be 1.8% to 2.2% 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 and services to the US in 2018, 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 possibility 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 are responding in a similar way on this topic.
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 a 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’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.
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.
Japanese construction activity is for the most part focused on new hotels, shopping centers, housing and 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 0.2% to 0.4% range in 2019. Japanese unemployment rate is forecast to be 2.6% for the next six months. Japanese inflation is forecast to be in the 0.4% in the 2nd Q of 2019. Japan is perhaps the engineering and construction leader on foundations, building and infrastructure construction design, methods and practices to minimized 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 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 2.9% to 3.3% growth, inflation will be in the 0.5% to 0.8% range and unemployment is forecast to be 4.5% to 4.8% in 2019. The South Korean construction sector is experiencing moderate 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.
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 Indonesia construction sector is performing exceptionally well in and around the Jakarta region, GDP is forecast to grow in the 4.9% to 5.4% in 2019, inflation is reasonably low between 2.3% and 2.7%, Indonesia unemployment is forecast to be 5.3% at the end of 2019.
Vietnam and 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 and gas facilities together with rail facilities are driving this growth.
Thailand, the Philippines and Laos are all displaying positive construction growth as we move further into 2019.