08 Jul 2020
Posted in Construction
GlobalData revises construction industry growth in Spain, growth now set to contract by 10.4%
Prior to the COVID-19 outbreak, the construction industry in Spain was already showing signs of slow down, with growth decelerating to 3.5% in 2019 after an annual average growth of 5% during the preceding four years. However, owing to the effects of COVID-19, the industry is now expected to contract by 10.4% in 2020, according to GlobalData, a leading data and analytics company.
Before the outbreak, GlobalData had predicted 1.6% growth for Spain’s construction industry. However, as the virus has intensified and Spain has been among the most affected countries in Europe, the forecast has been revised downwards to a contraction of 10.4%.
Danny Richards, Lead Economist at GlobalData, comments: “Construction projects have been severely affected due to the COVID-19 crisis. The contraction in the second quarter would likely be worse than the 9.1% contraction recorded in the first quarter owing to the lockdown and containment measures. In addition, the weaker economic activity will put pressure on the commercial, industrial and residential sectors.”
The tourism sector is the backbone of the Spanish economy, as it contributes around 6% of the country’s GDP. Travel restrictions imposed by the government have huge ramifications for all segments of the tourism sector. Due to the weak environment, projects in the leisure and hospitality buildings sector are likely to be halted due to a lack of financing.
Richards concludes: “The infrastructure sector is expected to face disruption in the coming months. The government had plans to upgrade the country’s road infrastructure with the Ministry of Development announcing a EUR5bn (US$5.7bn) program to improve roads in Spain. It is expected that once the virus outbreak subsides, works will once again restart and further investment in infrastructure projects will be forthcoming to kick-start the economic recovery. However, there are concerns that the government will face a sharp deterioration in its fiscal position, undermining its capacity to accelerate infrastructure investment.”