Construction activity in Latin America to contract further in 2020

The construction industry in Latin America is expected to contract further in 2020 following a decline in the previous year, according to forecast updates by GlobalData, a leading data and analytics company.

Before the COVID-19 pandemic, GlobalData expected growth in Latin America’s construction industry to recover to 2.3% by 2020 due to increasing construction activity, especially in Brazil. However, with the emergence of the virus and its rapid spread across the world alongside plummeting commodity prices, the region’s construction output is now expected to contract by 4.1% in 2020, down sharply from a previous forecast of -0.3% in the Q1 2020 update and a decline of 1.1% in 2019.

Dariana Tani, Economist at GlobalData, comments: “The short-term economic effects of the pandemic are already being felt via slower global demand, currency devaluations, a surge in capital flights and a significant drop in tourism and remittances as government revenues are being reduced.”

In Brazil, construction output is now expected to contract by 5.5% in 2020 down sharply from the previous forecast of 0.2% (Q1 2020 update) and growth of 1.6% in 2019. With the highest confirmed cases of COVID-19 in Latin America, which are expected to continue to rise in the coming weeks and add more pressure for longer periods of social distancing policies, the construction industry in Brazil is expected to struggle despite record-low interest rates as economic activity deteriorates and unemployment rises.

In Argentina, construction output is now projected to decline by 8% this year, down from the previous forecast projection of -5%. Worsening economic conditions amid spillovers from the coronavirus outbreak together with high levels of inflation and interest rates, debt renegotiations and a weakening peso rates will continue to dampen investor and consumer confidence and hold investment in infrastructure, residential and energy buildings.

In Mexico, meanwhile, construction output is forecast to contract by 7%, down significantly from the previous forecast projection of -1.5%. With weak investment since last year and the slow and possible ineffective response by the Mexican government to contain the coronavirus outbreak, activity is expected to continue to deteriorate this year.

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