Latin America’s construction industry is now forecast to grow by 9.7% in 2021 and 5.6% in 2022 (7.7% and 5.1% previously) due to higher-than-expected construction activity in the first quarter of 2021, especially in countries such as Brazil, Argentina, Colombia and Peru, where public authorities continue to struggle to contain COVID-19 infections, says GlobalData, a leading data and analytics company. The positive forecasts also reflect favorable base effects.

The company’s report, ‘Global Construction Outlook to 2025 (Q2 2021 Update)’, states that over the remainder of the forecast period (2023–2025), growth in the industry is forecast to moderate to an annual average of 3.1%, with construction output in the region now expected to return to its pre-pandemic level in 2023.

Dariana Tani, Economist at GlobalData, comments: “Despite the ongoing rise in COVID-19 cases, Latin America’s construction industry seems to be benefiting from a faster-than-expected recovery in the region’s economy as spillover effects of the recent US stimulus packages, and robust growth in China, are strengthening global economic conditions and leading to higher commodity prices.

“However, the continued shortage and rise in the price of building materials due to global supply chain issues, combined with the difficulties in obtaining building permits, delays in the approval of budgets, and inefficiency in the execution of public works remain major downside risks to the industry’s short-term outlook.”

Latin America’s pre-COVID fragilities, which have been aggravated by the pandemic, including public debt issues, excessive bureaucracy, and growing political and social tensions amid rising inflation and soaring unemployment and poverty levels, are likely to continue to hold back foreign and private investment in the industry in the coming years.

Tani adds: “The construction industry in Latin America began to recover in the second half of 2020 thanks in large part to the relaxation of pandemic-related restrictions, but the resurgence in COVID-19 cases, and slow start of vaccinations against the virus (with the exception of Chile and Uruguay) present additional challenges to the industry’s near-term prospects. For instance, it is likely that restrictions on travel and economic activity will stay in place in some form into the second half of this year in some countries in order to ease the strain on the healthcare system.”