Moody’s: global con­struc­tion sec­tor to re­main on growth path de­spite lin­ger­ing eco­nomic con­cerns

The National - News - - BUSINESS - DEENA KAMEL

The global con­struc­tion sec­tor is set to grow, al­beit at a slower pace, as in­fra­struc­ture spend­ing rises, boost­ing rev­enues and sta­bil­ity in the in­dus­try de­spite eco­nomic head­winds from the US-China trade dis­pute, ac­cord­ing to Moody’s In­vestors Ser­vice.

Global con­struc­tion com­pa­nies rated by Moody’s are ex­pected to slow down but ex­pe­ri­ence “still healthy” growth in rev­enues of four per cent on av­er­age over the next 12 to 18 months, driven by steady con­struc­tion de­mand, the rat­ing agency said in a re­port yesterday. This forecast, how­ever, is lower than the av­er­age 9 per cent rev­enue growth in 2018.

Moody’s has as­signed a sta­ble outlook to the sec­tor over the forecast pe­riod, driven by an in­crease in in­fra­struc­ture spend­ing and rev­enue growth led by Chi­nese com­pa­nies. Its outlook cov­ered 30 rated con­struc­tion com­pa­nies across nine coun­tries, with seven op­er­at­ing in Europe, the Mid­dle East and Africa, eight in the US, 13 in Asia – al­most all in China – and two in Aus­tralia.

“Healthy rev­enue growth and book-to-bill ra­tios point to sup­port­ive business con­di­tions for the global con­struc­tion sec­tor, sup­port­ing its sta­ble outlook for the in­dus­try,” Moody’s said.

“Al­though this growth is much lower ... it is re­flec­tive of the global slow­down in GDP [gross do­mes­tic prod­uct] growth and re­mains sup­ported pri­mar­ily by in­fra­struc­ture spend­ing.”

The In­ter­na­tional Mone­tary Fund has painted a grim outlook for the world econ­omy and warned of a “pre­car­i­ous” eco­nomic sit­u­a­tion as a re­sult of on­go­ing US-China trade fric­tion. The IMF on Tues­day slashed its global eco­nomic growth pro­jec­tion for a fifth con­sec­u­tive time to three per cent this year, the slow­est since the 2008 fi­nan­cial cri­sis and down from a 3.2 per cent es­ti­mate in July.

For next year, the IMF is pro­ject­ing a 3.4 per cent ex­pan­sion in global GDP on the back of bet­ter per­for­mances in economies in­clud­ing Brazil, Mex­ico, Russia and Saudi Ara­bia.

Moody’s said Chi­nese com­pa­nies will lead the strong­est rev­enue growth while con­di­tions are weak­est at UK con­struc­tion com­pa­nies amid un­cer­tainty around the coun­try’s exit from the Euro­pean Union.

Rev­enue growth among Chi­nese con­struc­tion com­pa­nies is pro­jected to rise six per cent over the next 12 to 18 months, al­though this is be­low the 10 per cent growth that was recorded in 2018.

“Growth will be driven by an in­crease in in­fra­struc­ture spend­ing, which is par­tially off­set by weak­ness in the prop­erty and in­dus­trial sec­tors,” Moody’s said.

Rev­enue for US con­struc­tion com­pa­nies are pro­jected to climb four per cent, while Euro­pean com­pa­nies are ex­pected to record the low­est rev­enue ex­pan­sion glob­ally, with only a 1 per cent rise, ac­cord­ing to the re­port.

“Rated US com­pa­nies ben­e­fit from strong spend­ing in cer­tain en­ergy end-mar­kets, while con­di­tions vary by coun­try in Europe and are weak­est in the UK amid Brexit un­cer­tainty,” Moody’s said.

Within the Asia-Pa­cific re­gion, rev­enue growth for Aus­tralian con­trac­tors is ex­pected to slow to three per cent, and re­main sup­ported by gov­ern­ment spend­ing on in­fra­struc­ture, par­tic­u­larly trans­port and telecom­mu­ni­ca­tions projects.

“Spend­ing on min­ing and nat­u­ral re­sources will also in­crease, but the res­i­den­tial sec­tor will re­main weak due to tight­ened credit con­di­tions and the com­ple­tion of a large sup­ply of res­i­den­tial projects that be­gun two years ago,” the rat­ings agency said.

The con­struc­tion site of Tesla’s fac­tory in Shang­hai. Moody’s ex­pects Chi­nese com­pa­nies to lead rev­enue growth Reuters

Newspapers in English

Newspapers from UAE

© PressReader. All rights reserved.