Construction industry in Singapore to plummet by 14.1% due to COVID-19, says GlobalData

Prior to the COVID-19 outbreak, the construction industry in Singapore had shown some signs of recovery, growing by 2.9% in 2019 following three consecutive years of decline. However, the COVID-19-induced economic weakness has disrupted the construction industry, with output now expected to plummet by 14.1% in 2020, says GlobalData, a leading data and analytics company.

The construction sector shrank by 4.3% on a year-on-year basis in the first quarter of 2020, based on the official ‘advanced’ estimates. The performance of the sector was weighed down primarily by a decline in private sector construction activities. While the total progress payment issued for construction declined by 2.3% in the first quarter of 2020, but construction contracts declined by 42.1% in March and 30.9% in Q1 2020.

Dhananjay Sharma, Analyst at GlobalData, comments: “The government had announced a one-month ‘circuit breaker’ period from 7 April, with construction industry closed for all excluding a few essential projects. With the recent resurgence of cases in the country – particularly in the migrant labour class – the construction industry will suffer due to disruptions in the supply chains  as well as shortage of labor even if the economy and the construction industry open up on 1 June 2020 after the extended circuit breaker period.”

COVID-19 will affect many key sectors in Singapore, particularly tourism. The total number of international visitor arrivals to Singapore declined by 43.3% year-on-year in the first three months of 2020, while in March alone the international visitor arrivals fell massively by 84.7% year on year.​

The increase in number of countries imposing lockdowns and travel restrictions coupled with the closure of entertainment venues, reduction in operation capacity at malls and cancellation of events will further pose a downside risk to the occupancy of leisure and hospitality buildings and earnings of the retail sector. This uncertain environment is expected to severely affect investments in the country’s commercial buildings, resulting in a sharp drop in construction activity in the short-term, as businesses focus on rebuilding their operations and not on investments in expansions. ​

Sharma concludes: “Singapore’s residential sector has remained weak, and the data for January-March 2020 for construction contract awards was negative in terms of a year-on-year comparison. Concerns also remain high over the growing stock of unsold buildings, which could further weigh on investor sentiment amid the economic downturn in the wake of the COVID-19 outbreak.”

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