Fitch unit sees slowdown in construction

Lawrence Agcaoili - The Philippine Star

MANILA, Philippines — Fitch Solutions Country Risk & Industry Research now expects slower growth for the construction industry in the Philippines amid the coronavirus disease 2019 (COVID-19) pandemic.

In its latest outlook on the Philippines’ construction sector, Fitch Solutions lowered the growth projection for the industry this year to 3.6 percent instead of 5.8 percent.

“The ongoing COVID-19 outbreak in the Philippines will reduce construction activity in 2020, which leads us to make a further downward revision of growth of the sector,” it added.

The construction industry grew by 4.1 percent last year.

Like many other countries around the world, the research arm of the Fitch Group said the Philippines is currently in the midst of a battle against COVID-19, which has upended normal business activity and forced the government to implement drastic measures in order to contain the virus. Luzon was placed under an enhanced community quarantine in the middle of March.

“As a result, works on numerous construction projects across Luzon have been temporarily halted, and hence, project timelines will be stretched and overall construction activity is expected to be reduced in 2020. Moreover, even as worksites gradually resume work, after the quarantine is lifted, certain projects will face supply chain challenges, as the flow of construction materials and equipment will be disrupted, especially if sourced from foreign markets,” it said.

Fitch expects projects to encounter delays in delivery due to logistical challenges and shortages in supply due to disrupted business activity.

Investment in residential, commercial, and industrial real estate sector are also seen to take a hit this year due to a deteriorating business and consumer sentiment not just in the Philippines but around the world.

Private developers could delay the launch of new projects and businesses could withhold their investments until business and consumer sentiment improves, Fitch said.

Fitch said the enhanced community quarantine would have further reduced construction activity n March and April.

“With strict quarantine measures imposed on Luzon, a large proportion of projects would have experienced stop work orders, leading to our bearish outlook for the Philippine buildings sector for 2020,” it said.

Fitch Solutions said healthcare infrastructure would remain a bright spot for investment over the short to medium term, providing a slight boost to growth of the non-residential buildings sector.

The research unit expects the country’s infrastructure sector to book a slower growth of 5.4 percent in real terms, contributed by a 5.1 percent expansion of the transport sector and a 5.6 percent growth of the energy and utilities sector.

“Similar to projects in the buildings sector, work on infrastructure projects in Luzon have also been halted due to the enhanced community quarantine, hence dragging growth of the sector,” the Fitch unit said.

The government is set to ramp up its Build Build Build program even if the Duterte administration has diverted some of the funding for its cash assistance program.

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