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The global construction market is plagued by numerous macroeconomic factors. The consistent hike in interest rates and surging raw material prices have had a severe impact on the industry growth over the last 12 months. Furthermore, the severe liquidity crunch faced by construction developers has forced many to shut down operations. Moreover, the rising cost of living is also affecting the disposable income of consumers, which is having an impact on the sales of housing units. While the global construction market is expected to underperform from the short to medium-term perspective, the growth recovery of the sector will be paved by government-funded projects.
In India, government-funded road projects are expected to pick up pace in Q4 2022, after a slowdown recorded in the September quarter due to a prolonged spell of rain. Furthermore, to avoid delays in the completion of low-cost construction projects, state governments are making amendments to release funds to ensure funding for construction activities is received on time. For instance,
The availability of funding from the state government is expected to accelerate construction activities in India, thereby paving the growth recovery of the sector from the short to medium-term perspective.
In China, the government has announced multi-billion-dollar support for the struggling construction market, which will subsequently revive economic growth. In line with the government vision, many of the state banks in the country have launched a concerted effort to infuse capital in the construction industry, by offering developers a credit line. For instance,
The liquidity infusion, which is expected to be over US$162 billion in total, will encourage these property developers to finish incomplete construction projects, while also allowing them to undertake new ones. These government-funded construction projects are, therefore, expected to revive the struggling construction market in China over the next three to four years.
In Indonesia, the government announced additional funding for the construction of a new capital city on Borneo Island. Previously, the Indonesian government had planned to spend IDR 43 trillion during the 2022-24 period. However, in November 2022, the government proposed additional spending of IDR 12.7 trillion over the next two years, to accelerate the construction activities of the new capital city Nusantara.
While the national governments in India, China, and Indonesia are funding projects in their respective countries, the government in the United Kingdom has guaranteed construction projects in West Africa. Notably, Deutsche Bank and MUFG Bank are funding construction projects worth £175 million in the West African states of Benin and Togo. These projects are guaranteed by UK Export Finance.
The construction projects involve building a ministerial city that will house 21 government ministries across 10 office buildings. The project also involves the construction of a restaurant and four-storey car park. While Deutsche Bank is funding £107 million for the office buildings, MUFG Bank is providing £69 million for the construction of roads between Benin and Togo. The construction project is also expected to drive inter-Africa trade. On the other hand, UK Export Finance is expected to create £47 million in export contracts.
To revive the struggling construction industry, many governments around the world have announced funding and support to revive the market growth. These government-funded construction projects are expected to pave the way for the recovery of the global construction market over the next three to four years.
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