Key Markets To Watch in 2019: Construction

Key Markets to Watch in 2019
Construction
Published: February 2019

Published: February 2019 Construction
1. Executive Summary
GlobalData provides construction output forecasts for 92 of the world’s largest construction markets. Alongside these
forecasts, there is supporting analysis of how political, economic, financial and market risks could affect construction activity,
and also on the degree of momentum in projects in the early stages of development through to the start of the execution
phase.
With a focus on these factors, GlobalData has selected 10 key markets to watch in 2019. The list includes the largest markets
in the World, China and the US, as well as key emerging markets that could see their construction industries return to positive
growth having struggled in recent years to generate an expansion in construction output - Brazil, Mexico, Saudi Arabia and
Nigeria. The list also includes two markets that have been posting particularly fast growth in recent years, but for which
downside risks abound - Poland and Kenya. There are also markets for which 2019 could prove to be a pivotal year: it could be
a year of political advancement in Thailand, with elections to return the country to democratic rule; and in the UK, the
industry’s growth prospects could be undermined if the authorities fail to deliver an optimal outcome to the country’s exit
from the EU.
Figure 1: Key Markets to Watch in 2019
Poland
Construction has been booming, as EU-
The UK funded projects have resulted in sharp
Uncertainty over the UK’s future outside of recovery from the 2016 downturn. However,
the EU continues to unnerve investors, but the surge in construction activity has put
The US the pipeline of infrastructure projects will intense upward pressure on construction
Demand for new infrastructure and support the construction industry’s expansion costs, which could disrupt project
maintenance together with ongoing implementation in 2019
investments especially in the transport, China
telecommunications and energy and utilities China’s construction industry strengthened in
sectors will support growth the latter stages of 2018, and will be propped
up by investment in infrastructure, but the
industry’s expansion remains on a general
slowing trend
Mexico Thailand
The outlook for the construction industry Thailand’s construction industry recovered in
remains positive, but the government’s 2018, and the pace of growth will pick up
decision to cancel the US$13 billion Airport supported by public investment in
project has undermined investors’ confidence infrastructure
Brazil Kenya
A recovery in construction industry is Healthy economic growth will continue to
underway but political uncertainty, rising support the expansion in construction, but
protectionism and environmental costs due to infrastructure developments could be
new planned works could hurt investment hampered by tighter fiscal policy in view of Saudi Arabia
and constrain construction output growth the country’s high public debt Construction in Saudi Arabia will recover,
Nigeria supported by progress on transport and
Construction industry has been improving, mobility schemes, social infrastructure
but given growing concerns over the 2019 developments, and energy megaprojects
general elections and its economic impact,
developers in Nigeria’s real estate sector are
apprehensive over investment in new projects
Source: GlobalData © GlobalData
© GlobalData 2019. This product is licensed and is not to be photocopied. 2

Risk and Momentum
GlobalData’s Construction Risk Index provides a standardized view of the underlying degree of country-level risk facing the
construction industries in 92 major developed and emerging markets around the world. The model provides an analysis of
current conditions and a forward-looking assessment of general and specific risks that could undermine the growth prospects
for the construction industries, by preventing new projects from being executed, disrupting existing projects, or ultimately
leading to project failures. The index incorporates four pillars of risk: political, economic, financial, and market.
GlobalData’s Construction Momentum Index assesses the latest developments on all mega-projects, applying a range of scores
from -5 to +5 depending on the nature of the development. Positive events include developments such as new projects being
announced, funding being secured, tenders being awarded, and project phases being completed. Negative events include
planning authority rejections, scope of work being reduced, through to projects being delayed or cancelled. The momentum
scoring system allows for neutral events such as projects awaiting approval.
The Markets to Watch in 2019 comprise a range of countries with varying levels of risk and momentum in their mega-project
pipelines. Saudi Arabia and Brazil are the only markets out of the 10 that are in the “high risk, negative momentum” category,
a position that is consistent with the struggles that both have faced in recent years. Although risk levels are relatively high in
Mexico, Kenya, Thailand and China, positive developments have been recorded in the mega-project pipelines in recent
quarters, ensuring they carry some positive momentum into 2019. It is a similar case for Nigeria, which is one of the highest
ranked markets out of the 92 assessed in GlobalData’s Construction Risk Index. The US, UK and Poland hold favorable positions
in the risk vs momentum matrix, with the relatively low levels of risk being reflected in positive momentum in their mega-
project pipelines. However, the UK’s score in the Construction Momentum Index has been on a falling trend, reflecting the
uncertainty that surrounds its exit from the EU.
Figure 2: Risk vs Momentum Matrix

0
Low risk, negative momentum Low risk, positive momentum
10
US UK
20
30 Poland
Construction Risk Index
40
Thailand China
50
Saudi Arabia
60 Brazil Mexico
Kenya
70
Nigeria
80
90
High risk, negative momentum High risk, positive momentum

100
-1.5 -1.0 -0.5 0.0 0.5 1.0 1.5
Construction Momentum Index

Source: GlobalData © GlobalData

2. The US
Growing demand for new infrastructure and maintenance works together with ongoing
investments in the transport, telecommunications and energy and utilities sectors will
support growth in the US construction.
Outlook
The outlook for the US construction industry remains positive, with growth in 2019 set to pick up pace, rising to 1.9% from just
0.4% in 2018. The growing demand for new infrastructure and maintenance together with ongoing investments especially in
the transport, telecommunications and energy and utilities sectors is set to support the expansion of the industry. Residential
construction will continue to expand due to low unemployment, steady wage growth and low housing inventories, while non-
residential construction will be supported by state funding measures, a recovery in tax receipts, and investments authorized
under the Fixing America’s Surface Transportation (FAST) Act to cover infrastructure projects through 2020. States are
currently pushing for higher gas tax and user fees in order to increase revenues for public works. There will also be a particular
focus on water infrastructure. In February 2019, the US Environmental Protection Agency (EPA) announced it had accelerated
investment in the country’s aging water infrastructure. In 2018, the EPA issued seven Water Infrastructure Finance and
Innovation Act (WIFIA) loans totaling nearly US$2 billion to help finance over US$4 billion for water infrastructure projects. In
November 2018, EPA invited 39 additional projects in 16 states and Washington DC to apply for a WIFIA loan. Collectively,
these selected borrowers will receive WIFIA loans totaling around US$5 billion to help finance over US$10 billion in water
infrastructure investments.
Risk watch
The outlook for construction in the US, however, is clouded by ongoing concerns over the possible escalation in trade wars
with key trading partners, as well as the prospect of slower economic growth and worsening labor shortages. While the signing
of the new US-Mexico-Canada free trade agreement (USMCA) to replace NAFTA in November 2018 and the 90-day trade truce
reached between the US and China in December 2018 are welcome steps towards de-escalating trade frictions, difficult
negotiations remain in the case of the US-China dispute and the domestic ratification of USMCA. Already the tariffs that were
imposed on steel, aluminum, lumber and a wide variety of Chinese imports last year as well as the uncertainty around their
effects have caused contractors to delay projects due to higher costs of imported raw materials.
Figure 3: The US – Key indicators
Construction Output (% change, real)

Construction Output Growth 1.6% Political Risk
5 100
(average %, 2019-2023)
4.5 80
4 60
Construction Output Value 1,594.0 40
3.5
(US$ Billion, 2019)
3 20
2.5 Market Risk 0 Financial Risk
Construction Risk Index 16th
2
(ranking out of 92)
1.5
1
GDP Growth 2.5%
(%, 2019)
0.5
0 Economic Risk
2016 2017 2018 2019 2020 2021 2022 2023
Source: GlobalData, IMF. Note: Risk scores, 100 = highest risk. © GlobalData

3. China
China’s construction industry strengthened in the latter stages of 2018, and will be propped
up by investment in infrastructure, but the industry’s expansion remains on a general
slowing trend.
Outlook
Construction activity in China expanded by 6.1% year on year in the fourth quarter of 2018, pulling growth for the year as a
whole up to 4.5%. Although this was a marginal improvement on the 2017 outturn, the pace of expansion in 2018 was still a
relatively sluggish performance for the industry as a whole; over the past decade, China’s construction industry has expanded
at an annual rate of 11%. Reflecting the weak performance in the buildings sector, in 2018 the total floor space of buildings
completed dropped by 1.3% compared to the previous year’s total.
The heady days of double-digit growth in China’s construction industry have long gone, with the authorities reining in
excessive debt-driven investment in infrastructure and urban development. Nevertheless, in view of the recent slowdown in
construction, the authorities can still revert to infrastructure investment to prop up the industry and support the economy
when necessary. In October 2018, for example, the State Council issued guidelines on increasing investment in various types of
infrastructure, notably railways, roads, waterways and airports. This infrastructure investment should help to offset the
continued slowdown in the residential sector, and help to keep annual average growth at around 4.0%.
Risk
China’s policymakers continue to struggle with the challenge of supporting the expansion in the economy while limiting the
financial risks associated with excessive fiscal and monetary stimulus. Furthermore, although negotiations over new trade
arrangements between China and the US appear to be making some headway, the general worsening trend in US-China
relations will drag on China’s economic activity. For the construction sector specifically, years of high levels of investment in
industrial capacity and real estate have resulted in oversupply, undermining the demand for new space. In view of the
slowdown in the property markets across the country, local authorities could relax measures that had been imposed to avoid
overheating in the market.
Figure 4: China – Key indicators

8 100
(average %, 2019-2023)
7 80
60
Construction Output Value 3,409.0 6
40
(US$ Billion, 2019) 5 20
4 Market Risk 0 Financial Risk
(ranking out of 92) 3
2
GDP Growth 6.2%
1
(%, 2019)
0 Economic Risk
2016 2017 2018 2019 2020 2021 2022 2023

4. The UK
Uncertainty over the UK’s future outside of the EU continues to unnerve investors, but the
pipeline of infrastructure projects will support the construction industry’s expansion
Outlook
The UK construction industry has suffered a sharp slowdown as high levels of uncertainty over the country’s exit from the EU
have unnerved investors and led to delays on major projects. The pace of expansion is estimated at just 0.1% in 2018, a sharp
deceleration from over 7% in 2017. Although GlobalData’s forecast is for an improvement in 2019, as the UK completes its exit
from the EU and investors get a clearer understanding of the UK’s business environment post Brexit, there are major downside
risks to this outlook if the UK exits the EU under a “no deal” scenario.
Over the medium term, once the UK adjusts to being outside the EU, GlobalData expects the UK construction industry to
gradually regain some momentum, supported by the government’s effort to boost economic growth through the development
of the country’s overall infrastructure. In the November 2018 update of the National Infrastructure and Construction Pipeline,
the government revealed that the infrastructure pipeline, comprising announced projects, programs and other spending
commitments, totaled over GBP400 billion (around US$530 billion) of planned investment, of which around GBP190 billion
would be invested by 2020/21. The outlook for residential and non-residential construction depends heavily on the health of
the overall economy. In the short term, with anxiety levels high regarding Brexit, new investments in commercial buildings
have slowed, and despite underlying support for residential construction coming from undersupply in key areas, the expansion
in the residential sector will be limited until a clearer outcome is determined with respect to the future of the UK’s economy
outside of the EU.
Risk watch
In the event that the UK manages to break away from the EU with a deal in place that ensures an optimal outcome for the UK’s
economy, the construction industry will regain growth momentum across all the main sectors. However, a more likely
outcome is that a sub-optimal exit strategy is delivered, which could be a “no deal”, or there could be a delay in the actual
withdrawal process that further prolongs the uncertainty. Concerns also persist over the potential for shortages of skilled labor
in the industry, given the industry’s reliance on foreign migrant workers, and a general lack of capacity to deliver the planned
mega projects.
Figure 5: The UK – Key indicators

8 100
(average %, 2019-2023)
7 80
60
Construction Output Value 403.0 6
40
(US$ Billion, 2019) 5 20
(ranking out of 92) 3
2
GDP Growth 1.5%
1
(%, 2019)
0 Economic Risk
2016 2017 2018 2019 2020 2021 2022 2023

5. Thailand
Thailand’s construction industry recovered in 2018, and the pace of growth will pick up
supported by public investment in infrastructure.
Outlook
Thailand’s construction output expanded by 2.6% in 2018, having recovered from the contraction of 3% in 2017 that was
owing to weak public investment, difficulties in land acquisition and an unstable political environment. Growth is forecast to
rise to 3.0% in 2019, and then average 3.7% a year in 2020-2023, with this upturn reflecting faster growth in public
construction, as well as an improvement in the residential buildings sector - with a particularly strong performances in Bangkok
and surrounding areas.
There is a commitment to developing the country’s transport infrastructure, and this will help to drive the forecast expansion
in infrastructure. In 2018 the government announced plans to spend over US$6 billion to build transport links in the Surat
Thani, Ranong, Chumphon and Nakhon Si Thammarat regions. Furthermore, the government allocated nearly US$4 billion to
develop transport infrastructure in the southern region of the country. This investment is centered on rail and road projects,
but there will also be developments in airports and ports. A major project in the pipeline is the State Railway of Thailand’s high
speed rail project linking three major airports (Don Muang-Suvarnabhumi-U Tapao), with the total investment value of around
US$7 billion. Contracts for the project could be awarded in 2019, but one of the main bidders, a consortium headed by
Charoen Pokphand Group, recently demanded a major change in the terms for the operating concession, which could delay
the progress of the project.
Risk watch
Thailand is set to hold a general election in March 2019, the first since the military took control of the government in 2014
after years of political instability and social unrest. It is likely that parties aligned with the military and the traditional
establishment will secure power following the elections, and the next government will focus on boosting the country’s
investment prospects, including a policy to increase public spending on infrastructure. Although the central forecast is for a
stable election that produces continuity in policymaking with a government aligned to the military, there is a risk of social
disorder than could undermine investor confidence and hamper the recovering in the construction industry.
Figure 6: Thailand – Key indicators

10 100
(average %, 2019-2023)
80
8
60
Construction Output Value 44.1 6 40
(US$ Billion, 2019)
20
4
Market Risk 0 Financial Risk
Construction Risk Index 50th 2
(ranking out of 92)
0
GDP Growth 3.9% -2
(%, 2019)
-4 Economic Risk
2016 2017 2018 2019 2020 2021 2022 2023

6. Poland
Construction has been booming in Poland, as EU-funded projects and a buoyant economy
have resulted in sharp recovery from the 2016 downturn. However, the surge in
construction activity has put upward pressure on construction costs, which could disrupt
project implementation in 2019
Outlook
Poland’s construction industry has been expanding at a rapid pace, quickly recovering from the downturn in 2016 that
stemmed from an economic slowdown and a decline in EU funding. Average annual growth of over 13% in 2017-18 primarily
reflected the resumption of financial aid from the EU, via the European Investment Bank, for major projects. The main driver
of the double-digit growth has been the infrastructure sector, but there has also been continued expansion in the residential
sector, reflecting the healthy state of the economy and the low interest rate environment.
Construction will remain buoyant in 2019, but the pace of growth will slow, as it will be difficult to for the industry to maintain
the lofty rates of growth of the past two years as EU-funded projects were implemented quickly. One of the main challenges
the industry will face in 2019 is dealing with high wages in the construction industry, a reflection of the fact that there is a
shortage of skilled labor amid the boom in construction work. Materials and equipment costs are also rising, and this in turn is
expected to have a negative impact on infrastructure projects. In late 2018 there were reports of numerous construction firms
reporting weaker profits in the face of rising costs that they were unable to pass on to their customers. It is therefore expected
that growth in the industry will return to a more sustainable level over the coming five years.
Risk watch
Ongoing disagreements over various governance issues between the government and EU, if left unresolved, could impact the
timely flow of EU funds in the coming years, and disrupt progress with major projects. The failure of the ruling Law and Justice
party (PiS) to deal with rule-of-law issues and the implementation of overly nationalistic policies mean that the government
runs the risk of possible EU sanctions. The risks could intensify given the likelihood that the PiS-led United Right coalition
government will remain in office following the forthcoming elections in late 2019.
Figure 7: Poland – Key indicators

20 100
(average %, 2019-2023)
80
15 60
(US$ Billion, 2019) 10
20
Construction Risk Index 22nd
(ranking out of 92)
0
GDP Growth 3.5% -5

(%, 2019)
-10 Economic Risk
2016 2017 2018 2019 2020 2021 2022 2023

7. Brazil
A recovery in Brazil’s construction industry is underway but political uncertainty, rising
protectionism and environmental costs due to new planned works could hurt investment
and constrain construction output growth.
Outlook
Brazil’s construction industry is to have contracted for the fifth consecutive year in 2018, shrinking by 2.5% in 2018 following a
contraction of 7.4% in 2017. However, the industry is expected to return to growth in 2019, albeit of only 0.9%, before
gathering growth momentum over the following few years, supported by government efforts to boost infrastructure
investment. In particular, the government’s plans to push forward with new roads and railways such as the construction of the
BR-319 highway, the extension of the BR-163 highway, the Ferrogrâo (Grainrail) and FIOL (Railway for the Integration of the
Center-West) is expected to support the recovery of the industry in the next five years. Such projects are expected to increase
Brazil’s capacity to export grain and minerals in the north of the country and open that region to mining and agribusiness. To
help finance these projects (given the fiscal constraints) the government plans to attract more private investment, especially
from China, the US and the EU. It also plans to streamline the country’s infrastructure agencies and root out corruption and
privatize or liquidate some 100 state-run companies. For road construction projects, the government plans to sign contract
with the private sector for US$27 billion over the next four years.
Risk watch
While uncertainty has somewhat eased in recent months (mainly due to the faded impact of the truckers’ strike and lower US
interest rate projections), there are still doubts over the new government’s ability to pass important reforms. In addition, rising
global protectionism as well as concerns about the environmental and social costs that will arise from the infrastructure
expansion the government is planning could undermine investor confidence and hamper the expansion of the construction
industry in the coming years. While the new minister of infrastructure has indicated that the new planned transportation
works in the Amazon can help Brazil’s industrial agribusiness grow without causing deforestation, he has failed to address how
all of this new planned infrastructure could be delivered without also degrading forests or impacting indigenous communities.
Figure 8: Brazil – Key indicators

4 100
(average %, 2019-2023)
2 80
60
40
(US$ Billion, 2019) -2 20
-4 Market Risk 0 Financial Risk
Construction Risk Index 73rd
(ranking out of 92) -6
-8
GDP Growth 2.4%
-10
(%, 2019)
-12 Economic Risk
2016 2017 2018 2019 2020 2021 2022 2023

8. Mexico
The outlook for the construction industry in Mexico remains positive but the government’s
decision to cancel a US$13 billion airport project has undermined investors’ confidence.
Outlook
The oulook for the construction industry in Mexico remains positive, but the government’s decision to cancel the US$13 billion
New Mexico International Airport (NAIM) project in October, after it was rejected in a public vote involving only 1% of the
electorate, has undermined investors’ confidence, given that the project was already about 30% completed. Mexico’s
construction industry has struggled in recent years to maintain growth momentum, having contracted by 2.4% in real terms in
2017. Although recovering in 2018, the general weakness has been driven by a decline in investment and the devaluation of
the peso. The industry is expected to expand at a slightly faster pace over the forecast period (2019-2023) supported by
government’s efforts to develop the country’s transport infrastructure as well as the energy and utilities sectors. Under the
Nation Project 2018–2024, the new government has prioritized earthquakes reconstruction projects and projects such as the
Transismic corridor for the integral development of the Isthmus of Tehuantepec, the ‘Maya Train’ on the Yucatan Peninsula in
addition to projects in rural roads, and sectors including oil and gas, water and sewerage, agricultural and mines.
Risk watch
However, uncertainty remains over the new government’s policy direction on a number of issues, notably its position on
private investment in the hydrocarbon sector and its potential impact on investment flows. President Lopez Obrador has
spoken against the liberalization of the country’s energy sector, though any reversal of policy of the previous administration
regarding private ownership in oil and gas projects could further weaken investor sentiment and undermine the new
government’s plans to boost upstream output and downstream capacity. The president, who took office last December, has
promised to encourage private investment and eradicate corruption. But his decision to cancel the partially built new
international airport has rattled investors. In January 2019, the IMF cut its 2019 economic growth projection for Mexico from
2.5% to 2.1% on the expectation of weaker private investment. In addition, while the new NAFTA trade deal with Mexico has
eased fears on future trade relations, it is unclear whether the US congress will approve it.
Figure 9: Mexico – Key indicators

4 100
(average %, 2019-2023)
80
3
60
Construction Output Value 158.5 2 40
(US$ Billion, 2019)
20
1
Market Risk 0 Financial Risk
Construction Risk Index 54th 0
(ranking out of 92)
-1
GDP Growth 2.5% -2
(%, 2019)
-3 Economic Risk
2016 2017 2018 2019 2020 2021 2022 2023

9. Saudi Arabia
After a prolonged period of decline, construction in Saudi Arabia will recover, supported by
progress on transport and mobility schemes, social infrastructure developments, and
energy megaprojects
Outlook
Having contracted for three successive years to 2018, the construction sector in Saudi Arabia is set to grow in 2019, expanding
by 1.9%, with ongoing large investments in infrastructure projects, such as the Riyadh metro and the US$500 billion NEOM
project, providing support alongside a general recovery in the economy that will be lifted by the pickup in oil prices. Economic
growth in the non-oil sector will accelerate to 2.8% as the lagged effect of higher oil prices and production feeds through to
these sectors, and as government spending is likely to rise further.
The government has announced that it is seeking to attract around US$430 billion in private sector investment over the next
10 years for a landmark infrastructure and industrial program as part of its economic diversification campaign. The plan aims
to channel investments through the National Industrial Development and Logistics Program (NIDLP), which was established
under Saudi Crown Prince Mohammed bin Salman's Vision 2030 program. The ambitious initiative is dedicated to diversifying
the kingdom's economy away from oil reliance and creating private sector jobs for Saudi nationals. The program is expected to
contribute US$320 billion to the Saudi economy by 2030, equivalent to almost half of the country’s 2018 GDP, and create 11
new industries from aerospace to biomedicine. Some Saudi Aramco projects will also come under the umbrella of the new
program, including an industrial park on the Persian Gulf coast.
Risk watch
More fiscal and economic improvements are expected in 2019 as the government steers towards balancing its budget by
2023. Nonetheless, there are downside risks that Saudi Arabia faces over the course of 2019 and beyond. Risks include the
impact of oil price fluctuations and weakness in the non-oil economic sectors. As for global oil prices, the most significant
factor influencing prices in terms of global demand is the growth rates of major advanced and emerging economies.
Furthermore, supply trends could be volatile, affected by changes in policies of major oil-producing countries, developments in
alternative energy, and geopolitical disruptions.
Figure 10: Saudi Arabia – Key indicators

4 100
(average %, 2019-2023)
3 80
60
40
(US$ Billion, 2019) 1 20
-2
GDP Growth 2.4%
-3
(%, 2019)
-4 Economic Risk
2016 2017 2018 2019 2020 2021 2022 2023

10. Nigeria
Nigeria’s construction industry has been improving, but given growing concerns over the
2019 general elections and its economic impact, developers in Nigeria’s real estate sector
are apprehensive over investment in new projects.
Outlook
Nigeria’s construction industry continued on a steady recovery path in 2018, expanding by 2.4%, following on from 1% growth
in 2017. Having contracted by around 6% in 2016, in the wake of the collapse in oil prices, Nigeria’s construction industry’s
performance has been bolstered by the government’s focus on developing the country’s infrastructure, energy and residential
sectors, as well as a general recovery in the economy. The latest projections from the World Bank are for growth of 2.2% in
2019 and 2.4% in 2020. The continued expansion in the economy as well as the construction industry will be dependent in part
on the ongoing implementation of the Economic Recovery and Growth Plan, which supports Nigeria’s industrialization process
through the establishment of industrial clusters. There is also a Power Sector Reform Program, which targets the attainment of
10 GW of operational capacity by 2020.
As the Nigerian economy remains heavily reliant on oil, it will continue to be vulnerable to price fluctuations. OPEC has
lowered Nigeria’s oil production level to 1.685 million barrels per day, and this cut coupled with fluctuations in oil price and
potential supply disruptions is expected to impact the 2019 budget implementation. Parliament’s approval of the NGN8.83
trillion (US$24.4 billion) 2019 “budget of continuity” may also be delayed due to the uncertainty surrounding the presidential
elections.
Risk Watch
Violence around both national and state-level elections remains a concern with the initial holding of the elections being
postponed in February 2019. Although there have been improvements in terms of a reduction in political violence in the
country, and the elections were eventually held, the outcome has been challenged owing to allegations of fraud. High levels of
political risk continue to have a major negative impact on the economy and investor confidence.
Figure 11: Nigeria – Construction output, risk and key indicators

8 100
(average %, 2019-2023)
6 80
60
40
(US$ Billion, 2019) 2 20
Construction Risk Index 91st
-4
GDP Growth 2.3%
-6
(%, 2019)
-8 Economic Risk
2016 2017 2018 2019 2020 2021 2022 2023

11. Kenya
Healthy economic growth will continue to support the expansion in construction, but
infrastructure developments could be hampered by tighter fiscal policy in view of the
country’s high public debt.
Outlook
Construction output growth in Kenya slowed in 2018, but it remained relatively high at 6.6%, and the pace of expansion is
expected to edge up again in 2019, to 7.4%. There are a number of major projects in roads, railways, water and sewerage that
will help to support the upward trend in construction output. In 2018 the World Bank also granted Kenya a US$1 billion
concessional loan for energy, transport and water infrastructure projects in poorer regions in its north and northeast, which
have benefited little from Kenya’s strong economic performance. In 2019, the real estate sector is also expected to perform
strongly, supported by an uptake in mortgages and a focus on affordable housing - the National Housing Corporation, for
example, has commenced the construction of 500,000 new housing units as part of its strategic plan to deliver decent and
affordable housing. However, concerns persist about Kenya’s debt sustainability. The government plans to continue fiscal
consolidation to restrain the rising deficit and stabilize public debt by improving revenue and controlling expenditure.
Risk watch
The government will face difficulties in ensuring that its fiscal consolidation efforts do not greatly undermine growth in the
economy, and it could also struggle to find sources of relatively low-cost financing in the face of a tightening in global capital
markets. Furthermore, some US$2.7 billion in loan repayments will be due to foreign lenders in 2019-20, a third of it to China.
Kenya risks handing over the Ports Authority to the China Exim Bank if it defaults on the loan for construction of the standard
gauge railway (SGR) as the five-year grace period that China’s government extended to Kenya in May 2014 for the SGR funds
comes to an end.
Kenya also continues to struggle to contain the threat posed by terrorism, with another deadly terrorist attack in January 2019.
The latest attack by the Somalia-based Islamist group, al-Shabab, at a luxury hotel in Nairobi, has increased security risks in the
country, and could potentially undermined investor confidence.
Figure 12: Kenya – Key indicators

12 100
(average %, 2019-2023)
80
10 60
(US$ Billion, 2019) 8
20
Construction Risk Index 62nd
(ranking out of 92)
4
GDP Growth 6.1% 2

(%, 2019)
0 Economic Risk
2016 2017 2018 2019 2020 2021 2022 2023

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Key Markets To Watch in 2019: Construction

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Key Markets To Watch in 2019: Construction

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Key Markets to Watch in 2019

Published: February 2019

Figure 1: Key Markets to Watch in 2019

Source: GlobalData © GlobalData

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Risk and Momentum

Figure 2: Risk vs Momentum Matrix

High risk, negative momentum High risk, positive momentum

Construction Momentum Index

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Figure 3: The US – Key indicators

Construction Output (% change, real)

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Figure 4: China – Key indicators

Construction Output (% change, real)

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Figure 5: The UK – Key indicators

Construction Output (% change, real)

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Figure 6: Thailand – Key indicators

Construction Output (% change, real)

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Figure 7: Poland – Key indicators

Construction Output (% change, real)

GDP Growth 3.5% -5

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Figure 8: Brazil – Key indicators

Construction Output (% change, real)

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Figure 9: Mexico – Key indicators

Construction Output (% change, real)

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Figure 10: Saudi Arabia – Key indicators

Construction Output (% change, real)

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Figure 11: Nigeria – Construction output, risk and key indicators

Construction Output (% change, real)

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Figure 12: Kenya – Key indicators

Construction Output (% change, real)

GDP Growth 6.1% 2

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12. About GlobalData

12.1. GlobalData at a Glance

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12.2. GlobalData Construction

How we help our clients

Improving the success of new business development

Maintaining or gaining a competitive advantage

• Making faster and more effective strategic decisions

Improving customer targeting

The CIC provides a complete view of the construction sector

• 100+ global and country-focused market analysis reports per year

• Company ranking tools to build lists of companies to target

• 125,000+ company profiles

• US$65 billion of construction mega-project (>US$25m) activity across 200 countries

• Project Contacts Database to search over 160,000 project contacts

News, Financial Deals and Opinions

• Regular analyst opinion highlighting key trends

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