Economic Growth And Public-Private Partnerships Will Positively Impact The Construction Market

17 Feb, 2020

The global construction market is expected to grow from $13,843 billion in 2019 to $18,775.3 billion in 2022 at a CAGR of 10.6%. This growth will result from the growing economy in emerging countries, increasing population, increasing public-private partnerships in infrastructure development, and increasing government investments in large-scale infrastructure projects such as railways and highways.

The construction market is expected to benefit from steady economic growth forecast for many developed and developing countries. Recovering commodity prices, after a decline in 2014 and 2015, are further expected to be a significant factor driving economic growth. The International Monetary Fund (IMF) predicts that the global real gross domestic product (GDP) growth will be 3.7% over 2019 and 2020, and 3.6% from 2021 to 2023. The US economy is expected to register stable growth during the forecast period. Additionally, emerging markets are expected to continue to grow slightly faster than the developed markets in the forecast period. For instance, India’s GDP is expected to grow at 7.3%, whereas China is forecast to register GDP growth of 6.2% in 2019. Greater economic growth is likely to drive public and private investments, joint ventures, and foreign direct investments in the end-user markets such as the construction industry, which directly benefits from robust economic growth, thus driving the global construction market going forward.

Developing countries such as India and China are attracting investments in the construction market. This is mainly due to continued economic growth, rapid urbanization and increase in investments in infrastructure. These countries are seeing changes in business models, reductions in bureaucracy and corruption, and promotion of private sector partnerships. For instance, in India, the government plans to invest $7.6 billion to provide sustainable housing facilities to its citizens under the Housing for All by 2022 program in 2015. In 2016, the Government of Brazil announced investments worth R$42 billion ($12.8 billion) in infrastructure projects which included the construction of roads and highways over the 2017-2018 period.

Globally, the highway, street and bridge construction market is driven by increasing number of partnerships and collaborations between public and private enterprises. For instance, the Brazilian government has collaborated with private investors to improve infrastructure. In 2016, the Investment Partnership Program (PPI) was launched to raise $14.4 billion to build roads, port terminals and railways. The program also focuses on restoring business confidence in the country.

Macro-economic factors such as economic growth, government spending, public-private partnerships, interest rates, disposable income and foreign investments have a significant impact on the construction market.