Construction activity in Mexico further hampered by COVID-19 and lower oil prices, says GlobalData

Mexico’s construction industry is forecast to continue to contract in 2020 albeit at a sharper rate than in 2019, according to GlobalData, a leading data and analytics company.

Before the COVID-19 pandemic, GlobalData was expecting Mexico’s construction industry to grow by 1.1% in 2020. However, in view of the evolving economic effects of the coronavirus outbreak and the government’s slow and possible ineffective response to contain it, GlobalData has further cut its construction output growth forecast for Mexico to -7% in 2020, down significantly from the previous forecast projection of -1.5% (Q1 2020 update) and the 5.1% contraction registered in 2019.

Dariana Tani, Economist at GlobalData, comments: “Further downward revisions are likely if activity in the short-term is more severely disrupted than currently anticipated. Mexico’s construction industry contracted sharply last year and was still suffering from weak investment levels before the pandemic started largely due to uncertainty over the policies of president Andrés Manuel López Obrador.

“While the government of Andrés Manuel López Obrador recently reaffirmed there will be continued investment in priority projects under its US$42bn National Infrastructure Plan for 2020-2024, which was launched last November to revive the economy, it will be hard to see this happening while his government plans to tighten the public sector budget amid lower oil prices and slowing economic and business activity.

“Without a major economic stimulus package to limit the economic effects of the pandemic, investors and major construction companies will remain hesitant to invest in such environment.”

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