Construction and the Coronavirus: The Global Outlook

Even before the UK government took the drastic measures implemented by other European markets to try to contain the spread of the coronavirus, there were already signs that the virus outbreak was adversely affecting the construction industry in the UK.

Lendlease, a multinational construction company, announced on March 13th that work on its Google headquarters project would be temporarily suspended following a worker testing positive for the coronavirus. 

The construction project is worth an estimated £1bn ($1.3bn), the temporary halting of this project will be a worrying sign of things to come in the industry as the virus outbreak worsens in the country. 

The construction industry is particularly at risk from the spread of the virus due to the nature of work – while many offices can instruct their employees to self-isolate and work remotely, once self-isolation takes place at a work site, all project work is halted. 

For this reason, the construction industry along with hospitality and tourism are likely to be the most severely impacted sectors by the spread of the coronavirus. More projects are expected to be temporarily halted, ushering in a difficult period for the construction industry. 

GlobalData has revised down its forecast for construction output growth in 2020 to 0.8%, from 1.0% previously. However, stimulus measures are being provided to support the economy and reassure investors. The Bank of England recently cut interest rates by 50 basis points to 0.25% and announced measures to support lending to small and medium sized businesses. 

In his budget announcement on 11 March, the Chancellor, Rishi Sunak, revealed plans for the biggest infrastructure spending increase since the financial crisis. The increase in spending for key infrastructure such as roads and railways and also for new homes is expected to support growth in the construction industry once the impact of the coronavirus subsides.

There is no doubting that China’s economy has been severely affected by the widespread outbreak of the coronavirus and the subsequent drastic measures imposed across the country to contain the spread. However, the question for some weeks now has been that of how damaging the developments have been in terms of the economic cost.

Data published by the National Bureau of Statistics on 16 March included the official line that the “national economy withstood the impact” of the coronavirus, but the economic hit was unprecedented. In the first two months of the year, industrial production was down by 13.5% year on year, while investment in fixed assets plunged by 24.5%. Of note, fixed asset investment in infrastructure contracted by 30.3% and in real estate development it was down by 16.3%. 

In terms of the purchasing managers’ index, for non-manufacturing business activities the index was down at 29.6 in February (compared to 54.1 in January), with a score below 50 suggesting a contraction. The new orders index was at 26.5 in February, with that of the construction industry at just 23.8, down from 53.8 in January. 

Although there are some doubts over the veracity of the official statistics, commentators have opined that the statistics show the impact was worse than anticipated. 

Data for the first quarter as a whole could yet show a deeper decline given that the lockdowns continued into March, but by mid-March there was anecdotal evidence suggesting that economic activity across China had gradually started to recover, with new confirmed cases of virus falling sharply. Domestic trucking, for example, was reportedly back to around 80% of normal levels, enabled by the recent lifting of roadblocks and traffic restriction across major cities. 

A positive sign for construction is that migrant workers have been returning to work – the latest official statistics show that 78 million workers have returned to work, which is equivalent to around 60% of those who had returned to their home provinces for the Lunar New Year festival in late January. 

The government is likely to ramp up investment in infrastructure in the second half of the year, which should help to recover much of the output losses in the first quarter. Nevertheless, investor confidence will continue to be undermined by the ongoing coronavirus outbreak globally, growth in construction output in 2020 at best will be 4.1% (down from 5.6% in 2019), according to GlobalData. 

As the US appears to gradually lock down its entire economy to slow the spread of Covid-19, homebuilders across the US are expected to face a sharp slowdown in new construction projects in the coming months.

According to a survey by the National Association of Home Builders (NAHB), builders’ confidence remained solid in March – falling from 74 in February to 72, registering only a slight decline.

However, the group said that over half of the builders' responses were collected before 4 March, so the rising economic effects stemming from the coronavirus and the recent stock market sell-offs will be reflected more in next month's report and it expects an ‘incredible disruptive’ second quarter as businesses close and lay off workers.

FactSet, a financial data and software company, said that the S&P Homebuilders Select Industry index fell 41% this year, surpassing the 25% decline in the S&P 500 over the period.

The coming days and weeks will be crucial in determining the scale of the slowdown although some economists surveyed by the National Association of Realtors are already anticipating that home sales could decline by as much as 35% in the coming months.

According to the US Department of Labor, jobless claims for unemployment benefits in the US climbed to 281,000 for the week ending 14 March, up from 211,000 in the previous week as businesses throughout the US, especially in industries such as leisure and hospitality, were forced to shut down and cut jobs amid the coronavirus outbreak.

The labour department also said that claims could reach more than 2 million by 26 March, the largest weekly increase in jobless claims and the highest level on record. New York’s state labour department website, for instance, is averaging over 250,000 logins per day, a 400% increase over the normal average.

The US residential construction market was already struggling before the Covid-19 outbreak due to rising building costs, shortages of skilled labour and expensive land. However, it was showing signs of recovering especially during September 2019 and January 2020. It is now facing additional challenges as the economy is likely to enter a recession in the second quarter, more people are laid off, and buyers and sellers reconsider their plans.

Supply-chain disruptions related to imports from China and other countries and difficulties in obtaining government permits or inspections are other major issues impacting the market. Almost 30% of all US building product imports come from China as materials are generally less expensive.

Even though factories in China are gradually returning to work, an increasing number of them are expected to experience shortages of components and materials caused by global supply-chain disruptions for the months to come.

According to the American Chamber of Commerce in South China, all 237 foreign and Chinese companies it surveyed between 9 March and 14 March, were still suffering disruptions to their businesses while a third of them were facing shortages of components and materials. These figures indicate that while China has turned the corner on the coronavirus outbreak, their factories will continue to struggle for now, and cause disruptions to global supply chains.

Egypt’s construction industry has been among the fastest growing in the world, expanding by an average of over 9% in the past few years. GlobalData had expected another year of rapid growth in 2020, but there are major downside risks facing the industry, as the authorities announce strict measures to contain the spread of the coronavirus.

There have been policy initiatives to support the economy, however. The Central Bank of Egypt slashed interest rates by 300 bps in a surprise move on 16 March. A rate cut of this magnitude will create room for policymakers to deal with a potentially widespread coronavirus outbreak, support the economy, and bail out EgyptAir, the national airline carrier.

This comes after Egypt’s Prime Minister, Mostafa Madbouly, announced that Egypt will suspend aviation movement at all airports starting 19 March until 31 March. He added all hotels in Egypt will launch a wide sterilisation campaign during the suspension period. He explained that this suspension will cost Egypt losses up to EGP2.25bn ($142.8m) in both the tourism and aviation sectors.

In other troubling policy responses for the tourism sector, the Governor of the Red Sea issued a decree to halt domestic tourism for 14 days, starting from the departure date of the last foreign tourist. The decree also includes quarantining workers in the tourism industry for 14 days as a pre-emptive measure against the spread of the coronavirus. The measures are likely to have a severe impact on the construction industry, particularly in commercial buildings, as investment plans are expected to be halted, if not cancelled outright.

The Sisi administration is preparing a new stimulus package to help the economy, targeting both the stock exchange and the real economy. It has pledged to allocate EGP100bn ($6.4bn) to combat the coronavirus. The Cabinet announced that as part of the package it will lower natural gas prices for industry and provide EGP1bn ($63.5m) for exporters among other measures aimed at supporting the industrial sector in the wake of the coronavirus outbreak. 

Assuming these are successful, it could help to prevent a slowdown in the overall economy, which will help to maintain investor confidence and allow for further expansion in construction output.

The coronavirus has been slow to take root in Sub-Saharan Africa (SSA), but the number of cases is now beginning to grow and the construction industry is facing disruption stemming from the China shutdown.
From imposing travel bans to barring mass gatherings and shutting down schools, governments across Africa are increasingly implementing comprehensive measures in a bid to control the spread of the new coronavirus. The emergency moves come amid a worrying rise in the number of infections registered in in just a few days across the continent after weeks of relatively few reported cases. As of 19 March, 33 African countries combined had reported more than 600 cases and 17 deaths due to the virus, with 150 cases reported in South Africa.

With regards to the coronavirus outbreak, GlobalData has cut its forecast for SSA’s construction output growth to 5.4% in 2020, from 6.0% previously.

Although the direct impact from the coronavirus has been limited in the region to date, many countries in Africa are exposed to the knock-on effects from the shutdowns in China.

In recent years, China has emerged not only as SSA’s largest trading partner but as a large and fast-growing source of aid and the largest source of construction financing. These contributions have supported many of Africa’s most ambitious infrastructure developments in recent years.

As part of their increasing activity in overseas markets, Chinese companies have significantly boosted their engagement in Africa covering a wide range of sectors. Africa is part of China’s ‘One Belt, One Road’ (BRI) initiative, with significant focus on coal and large hydropower projects.

The coronavirus outbreak presents a downside risk for short-term growth in the region, particularly in Ghana, Angola, South Africa, and Nigeria, which are reliant on China’s demand for their commodities exports. With mass production shutdowns and supply chain disruptions due to port closures in China, the effects are already being felt, while Africa’s access to industrial components and manufactured goods from the region has been hindered. 

Construction companies have also suffered a lack of access to skilled personnel from affected regions, who have been unable to travel to project locations due to travel bans, quarantines and self-isolation, and this will delay the completion of projects. 

There is also a risk of a short-term dip in BRI related activity as the Chinese government evaluates its investment in the region and may opt to trim its investments in less critical markets. This adds more uncertainty to the region marred with widespread geopolitical and economic instability. 

On a more optimistic side, the African Continental Free Trade Area will effectively kick in July 2020, which should provide a boost to deal activity across the region.

Poland has become the latest country in Europe to announce fiscal stimulus measures to offset the disruption to economic activity caused by the widespread outbreak of the coronavirus.

The Polish government has announced an emergency fiscal stimulus plan to shield businesses and workers from the fallout of the epidemic. The Polish government expects that the virus will severely impact the economy, and in response have announced a stimulus package worth PLN212bn ($52bn), which is equivalent to 9% of GDP.

The measures include loan guarantees for businesses, covering up to 40% of salaries for employees who are unable to work and allowing companies to delay their social security contributions. The Polish central bank has also cut its benchmark interest 50 basis points and announced liquidity measures to help businesses.

The Polish government has announced quarantine measures to slow the spread of the virus, which includes closing its land border with neighbouring countries and closing restaurants, cinemas and cafes across the country.

The quarantine measures are likely to lead to severe disruption for the construction industry in Poland. Projects are expected to be halted temporarily while the lockdown is in place. GlobalData forecasts that the Polish construction industry will grow by 3.8% in 2020.

This is dependent on the virus being contained by mid-2020. However, if the situation deteriorates in the coming months, a downward revision to the forecast is likely.

Turkey's policymakers have taken steps to support the economy as the impact of the coronavirus worsens.
There has been an easing in monetary and fiscal policy stances in Turkey, with the government and central bank seeking to reassure businesses and markets amid the escalating outbreak.

On the 17 March, the Turkish central bank reduced its key interest rate by 100 basis points to 9.75% and announced measures to support lending to businesses struggling with liquidity due to the virus outbreak.

As the virus outbreak worsens in the country, the Turkish President, Tayyip Erdogan, has announced quarantine measures including a lockdown. Flights into the country have been suspended with the government ordering the closure of cafes, bars and restaurants to slow down the spread of the virus.

The President also announced a $15.5bn fiscal stimulus package amid worsening economic conditions in Turkey. The package aims to support businesses struggling due to the virus outbreak and will include tax reliefs with VAT on domestic airlines cut from 18% to 1%. Tax payments for the hospitality, tourism and automotive sectors will be deferred for the next three months.

The construction sector is expected to suffer as a result of the outbreak, and particularly if workers are not able to get on site, projects are likely to be halted. However, as Turkey is a net importer of oil, the sharp falls in the price of oil and other commodities are expected to support growth in the sector. 

GlobalData forecasts that output in the construction industry will increase by 3.2% in 2020, following a deep contraction of 9.2% in 2019. The growth forecast is contingent on the virus outbreak being contained by mid-2020, however downward revision of the forecast is likely if the situation worsens in the coming months.

Already with one of the world’s slowest economic growths and rocked by ongoing street protests and issues such as corruption scandals, high levels of crime and rising inequality, Latin America is now bracing for the prospect of going further backwards as the number of coronavirus cases rises quickly across the region.

Due to its high-commodity export dependence and direct trade exposures to China, the US and the EU, the region’s economy and construction industry will be severely impacted by slower global demand and significant commodity price declines caused by the pandemic.

According to the International Monetary Fund, more than 25% of Brazil, Chile and Peru’s exports go to China, and the capacity to quickly redirect commodity exports to other countries will become a challenge.

Colombia and Ecuador will also be hurt by a sustained drop in oil prices, though Ecuador, which is struggling to pay its foreign debt and keep on track with a $4.2bn IMF bailout programme, is likely be more severely hit as it is projected to grow by less than 1% this year.

As a result, GlobalData has revised down its construction growth forecast for the region as a whole in 2020 to 1.6% from a prior forecast of 2.3% in the Q4 2019 update.

Even before the UK government took the drastic measures implemented by other European markets to try to contain the spread of the coronavirus, there were already signs that the virus outbreak was adversely affecting the construction industry in the UK.

Lendlease, a multinational construction company, announced on March 13th that work on its Google headquarters project would be temporarily suspended following a worker testing positive for the coronavirus. 

The construction project is worth an estimated £1bn ($1.3bn), the temporary halting of this project will be a worrying sign of things to come in the industry as the virus outbreak worsens in the country. 

The construction industry is particularly at risk from the spread of the virus due to the nature of work – while many offices can instruct their employees to self-isolate and work remotely, once self-isolation takes place at a work site, all project work is halted. 

For this reason, the construction industry along with hospitality and tourism are likely to be the most severely impacted sectors by the spread of the coronavirus. More projects are expected to be temporarily halted, ushering in a difficult period for the construction industry. 

GlobalData has revised down its forecast for construction output growth in 2020 to 0.8%, from 1.0% previously. However, stimulus measures are being provided to support the economy and reassure investors. The Bank of England recently cut interest rates by 50 basis points to 0.25% and announced measures to support lending to small and medium sized businesses. 

In his budget announcement on 11 March, the Chancellor, Rishi Sunak, revealed plans for the biggest infrastructure spending increase since the financial crisis. The increase in spending for key infrastructure such as roads and railways and also for new homes is expected to support growth in the construction industry once the impact of the coronavirus subsides.

There is no doubting that China’s economy has been severely affected by the widespread outbreak of the coronavirus and the subsequent drastic measures imposed across the country to contain the spread. However, the question for some weeks now has been that of how damaging the developments have been in terms of the economic cost.

Data published by the National Bureau of Statistics on 16 March included the official line that the “national economy withstood the impact” of the coronavirus, but the economic hit was unprecedented. In the first two months of the year, industrial production was down by 13.5% year on year, while investment in fixed assets plunged by 24.5%. Of note, fixed asset investment in infrastructure contracted by 30.3% and in real estate development it was down by 16.3%. 

In terms of the purchasing managers’ index, for non-manufacturing business activities the index was down at 29.6 in February (compared to 54.1 in January), with a score below 50 suggesting a contraction. The new orders index was at 26.5 in February, with that of the construction industry at just 23.8, down from 53.8 in January. 

Although there are some doubts over the veracity of the official statistics, commentators have opined that the statistics show the impact was worse than anticipated. 

Data for the first quarter as a whole could yet show a deeper decline given that the lockdowns continued into March, but by mid-March there was anecdotal evidence suggesting that economic activity across China had gradually started to recover, with new confirmed cases of virus falling sharply. Domestic trucking, for example, was reportedly back to around 80% of normal levels, enabled by the recent lifting of roadblocks and traffic restriction across major cities. 

A positive sign for construction is that migrant workers have been returning to work – the latest official statistics show that 78 million workers have returned to work, which is equivalent to around 60% of those who had returned to their home provinces for the Lunar New Year festival in late January. 

The government is likely to ramp up investment in infrastructure in the second half of the year, which should help to recover much of the output losses in the first quarter. Nevertheless, investor confidence will continue to be undermined by the ongoing coronavirus outbreak globally, growth in construction output in 2020 at best will be 4.1% (down from 5.6% in 2019), according to GlobalData. 

As the US appears to gradually lock down its entire economy to slow the spread of Covid-19, homebuilders across the US are expected to face a sharp slowdown in new construction projects in the coming months.

According to a survey by the National Association of Home Builders (NAHB), builders’ confidence remained solid in March – falling from 74 in February to 72, registering only a slight decline.

However, the group said that over half of the builders' responses were collected before 4 March, so the rising economic effects stemming from the coronavirus and the recent stock market sell-offs will be reflected more in next month's report and it expects an ‘incredible disruptive’ second quarter as businesses close and lay off workers.

FactSet, a financial data and software company, said that the S&P Homebuilders Select Industry index fell 41% this year, surpassing the 25% decline in the S&P 500 over the period.

The coming days and weeks will be crucial in determining the scale of the slowdown although some economists surveyed by the National Association of Realtors are already anticipating that home sales could decline by as much as 35% in the coming months.

According to the US Department of Labor, jobless claims for unemployment benefits in the US climbed to 281,000 for the week ending 14 March, up from 211,000 in the previous week as businesses throughout the US, especially in industries such as leisure and hospitality, were forced to shut down and cut jobs amid the coronavirus outbreak.

The labour department also said that claims could reach more than 2 million by 26 March, the largest weekly increase in jobless claims and the highest level on record. New York’s state labour department website, for instance, is averaging over 250,000 logins per day, a 400% increase over the normal average.

The US residential construction market was already struggling before the Covid-19 outbreak due to rising building costs, shortages of skilled labour and expensive land. However, it was showing signs of recovering especially during September 2019 and January 2020. It is now facing additional challenges as the economy is likely to enter a recession in the second quarter, more people are laid off, and buyers and sellers reconsider their plans.

Supply-chain disruptions related to imports from China and other countries and difficulties in obtaining government permits or inspections are other major issues impacting the market. Almost 30% of all US building product imports come from China as materials are generally less expensive.

Even though factories in China are gradually returning to work, an increasing number of them are expected to experience shortages of components and materials caused by global supply-chain disruptions for the months to come.

According to the American Chamber of Commerce in South China, all 237 foreign and Chinese companies it surveyed between 9 March and 14 March, were still suffering disruptions to their businesses while a third of them were facing shortages of components and materials. These figures indicate that while China has turned the corner on the coronavirus outbreak, their factories will continue to struggle for now, and cause disruptions to global supply chains.

Egypt’s construction industry has been among the fastest growing in the world, expanding by an average of over 9% in the past few years. GlobalData had expected another year of rapid growth in 2020, but there are major downside risks facing the industry, as the authorities announce strict measures to contain the spread of the coronavirus. 

There have been policy initiatives to support the economy, however. The Central Bank of Egypt slashed interest rates by 300 bps in a surprise move on 16 March. A rate cut of this magnitude will create room for policymakers to deal with a potentially widespread coronavirus outbreak, support the economy, and bail out EgyptAir, the national airline carrier. 

This comes after Egypt’s Prime Minister, Mostafa Madbouly, announced that Egypt will suspend aviation movement at all airports starting 19 March until 31 March. He added all hotels in Egypt will launch a wide sterilisation campaign during the suspension period. He explained that this suspension will cost Egypt losses up to EGP2.25bn ($142.8m) in both the tourism and aviation sectors.

In other troubling policy responses for the tourism sector, the Governor of the Red Sea issued a decree to halt domestic tourism for 14 days starting the departure date of the last foreign tourist. The decree also includes quarantining workers in the tourism industry for 14 days as a pre-emptive measure against the spread of the coronavirus spread. The measures are likely to have a severe impact on the construction industry, particularly in commercial buildings, as investment plans are expected to be halted, if not cancelled outright.

The Sisi administration is preparing a new stimulus package to help the economy, targeting both the stock exchange and the real economy. It has pledged to allocate EGP100bn ($6.4bn) to combat the coronavirus. The Cabinet announced that as part of the package it will lower natural gas prices for industry and provide EGP1bn ($63.5m) for exporters among other measures aimed at supporting the industrial sector in the wake of the coronavirus outbreak. 

Assuming these are successful, it could help to prevent a slowdown in the overall economy, which will help to maintain investor confidence and allow for further expansion in construction output.

The coronavirus has been slow to take root in Sub-Saharan Africa (SSA), but the number of cases is now beginning to grow and the construction industry is facing disruption stemming from the China shutdown.
From imposing travel bans to barring mass gatherings and shutting down schools, governments across Africa are increasingly implementing comprehensive measures in a bid to control the spread of the new coronavirus. The emergency moves come amid a worrying rise in the number of infections registered in in just a few days across the continent after weeks of relatively few reported cases. As of 19 March, 33 African countries combined had reported more than 600 cases and 17 deaths due to the virus, with 150 cases reported in South Africa.

With regards to the coronavirus outbreak, GlobalData has cut its forecast for SSA’s construction output growth to 5.4% in 2020, from 6.0% previously.

Although the direct impact from the coronavirus has been limited in the region to date, many countries in Africa are exposed to the knock-on effects from the shutdowns in China. 

In recent years, China has emerged not only as SSA’s largest trading partner but as a large and fast-growing source of aid and the largest source of construction financing. These contributions have supported many of Africa’s most ambitious infrastructure developments in recent years.

As part of their increasing activity in overseas markets, Chinese companies have significantly boosted their engagement in Africa covering a wide range of sectors. Africa is part of China’s ‘One Belt, One Road’ (BRI) initiative, with significant focus on coal and large hydropower projects.

The coronavirus outbreak presents a downside risk for short-term growth in the region, particularly in Ghana, Angola, South Africa, and Nigeria, which are reliant on China’s demand for their commodities exports. With mass production shutdowns and supply chain disruptions due to port closures in China, the effects are already being felt, while Africa’s access to industrial components and manufactured goods from the region has been hindered. 

Construction companies have also suffered a lack of access to skilled personnel from affected regions, who have been unable to travel to project locations due to travel bans, quarantines and self-isolation, and this will delay the completion of projects. 

There is also a risk of a short-term dip in BRI related activity as the Chinese government evaluates its investment in the region and may opt to trim its investments in less critical markets. This adds more uncertainty to the region marred with widespread geopolitical and economic instability. 

On a more optimistic side, the African Continental Free Trade Area will effectively kick in July 2020, which should provide a boost to deal activity across the region.

Poland has become the latest country in Europe to announce fiscal stimulus measures to offset the disruption to economic activity caused by the widespread outbreak of the coronavirus.

The Polish government has announced an emergency fiscal stimulus plan to shield businesses and workers from the fallout of the epidemic. The Polish government expects that the virus will severely impact the economy, and in response have announced a stimulus package worth PLN212bn ($52bn), which is equivalent to 9% of GDP.

The measures include loan guarantees for businesses, covering up to 40% of salaries for employees who are unable to work and allowing companies to delay their social security contributions. The Polish central bank has also cut its benchmark interest 50 basis points and announced liquidity measures to help businesses.

The Polish government has announced quarantine measures to slow the spread of the virus, which includes closing its land border with neighbouring countries and closing restaurants, cinemas and cafes across the country.

The quarantine measures are likely to lead to severe disruption for the construction industry in Poland. Projects are expected to be halted temporarily while the lockdown is in place. GlobalData forecasts that the Polish construction industry will grow by 3.8% in 2020. 

This is dependent on the virus being contained by mid-2020. However, if the situation deteriorates in the coming months, a downward revision to the forecast is likely.

Turkey's policymakers have taken steps to support the economy as the impact of the coronavirus worsens.
There has been an easing in monetary and fiscal policy stances in Turkey, with the government and central bank seeking to reassure businesses and markets amid the escalating outbreak.

On the 17 March, the Turkish central bank reduced its key interest rate by 100 basis points to 9.75% and announced measures to support lending to businesses struggling with liquidity due to the virus outbreak.

As the virus outbreak worsens in the country, the Turkish President, Tayyip Erdogan, has announced quarantine measures including a lockdown. Flights into the country have been suspended with the government ordering the closure of cafes, bars and restaurants to slow down the spread of the virus.

The President also announced a $15.5bn fiscal stimulus package amid worsening economic conditions in Turkey. The package aims to support businesses struggling due to the virus outbreak and will include tax reliefs with VAT on domestic airlines cut from 18% to 1%. Tax payments for the hospitality, tourism and automotive sectors will be deferred for the next three months.

The construction sector is expected to suffer as a result of the outbreak, and particularly if workers are not able to get on site, projects are likely to be halted. However, as Turkey is a net importer of oil, the sharp falls in the price of oil and other commodities are expected to support growth in the sector.

GlobalData forecasts that output in the construction industry will increase by 3.2% in 2020, following a deep contraction of 9.2% in 2019. The growth forecast is contingent on the virus outbreak being contained by mid-2020, however downward revision of the forecast is likely if the situation worsens in the coming months.

Already with one of the world’s slowest economic growths and rocked by ongoing street protests and issues such as corruption scandals, high levels of crime and rising inequality, Latin America is now bracing for the prospect of going further backwards as the number of coronavirus cases rises quickly across the region.

Due to its high-commodity export dependence and direct trade exposures to China, the US and the EU, the region’s economy and construction industry will be severely impacted by slower global demand and significant commodity price declines caused by the pandemic.

According to the International Monetary Fund, more than 25% of Brazil, Chile and Peru’s exports go to China, and the capacity to quickly redirect commodity exports to other countries will become a challenge.

Colombia and Ecuador will also be hurt by a sustained drop in oil prices, though Ecuador, which is struggling to pay its foreign debt and keep on track with a $4.2bn IMF bailout programme, is likely be more severely hit s it is projected to grow by less than 1% this year.

As a result, GlobalData has revised down its construction growth forecast for the region as a whole in 2020 to 1.6% from a prior forecast of 2.3% in the Q4 2019 update.