Construction sector sees upbeat growth this year

CEBU, Philippines - The Philippine Constructors Association Inc. (PCA) sees growth acceleration in the construction sector in the country, banking on the government and private sector’s strong confidence for infrastructure investments.

The government’s P140 billion allocation for infrastructure development this year alone, excluding the increased private sector expenditures on buildings and tourism related facilities, through the Department of Public Works and Highways (DPWH) could already make the contractors much busier starting this year.

PCA projection revealed that public construction will continue to boost the sector in the next three years as the DPWH’s rally will be sustained to garner more than P600 billion capital outlays by the end of 2016.

With 2012 ending at a high note for the sector and the whole economy, and prospects both at home and abroad looking a bit better, the fearless forecast for 2013 would show a faster acceleration in growth by as much as eight percent.

This will be coupled with sustained low inflation rate (projected to stabilize at three percent or lower) and low interest rates (91-day T-bill rate and 10-yr T-bond at two percent and 4.5 percent, respectively).

However, this assumes that the peso will not appreciate further to below P40 per one dollar, otherwise this will just dampen the growth-positive potential.

According to PCA industry report, the staggering increase in public construction investments in 2012, reinforced by conducive macroeconomic conditions, government’s ability to further boost infrastructure expenditures, growing electricity demand, and the 2013 midterm elections-related spending, will provide a blistering momentum for the construction sector this year.

The increased growth of the private sector in real estate development supported by low interest rates will likewise contribute to the sector’s expansion.

Improved business confidence mainly because of efforts of current administration to combat corruption is also seen to support growth in the economy and the construction as this leads to more investments.

According to the latest Social Weather Station survey in quarter 4 of 2012, the President’s satisfaction grade was “very good” with a net score of +55.

Aside from these positive factors, the construction sector can ride on the rise in the following economic growth drivers or the emerging industries: tourism and business process outsourcing (BPO);   OFW remittances; and public-private partnership (PPP) program of the current administration.

Increasing activities in these growth drivers would result to more civil construction works such as office buildings, roads and bridges, facilities for utilities, and the like.

In the international scene, the sector also faces a host of opportunities.

Because of the slow recovery of US economy and the debt crisis in Europe, Asia has now become a catalyst of global recovery, providing a prospective destination for construction activities.

“The world is now looking at this region, especially in the Philippines, which is an emerging hub in Asia for both business and leisure,” the report revealed.

The need to enhance the capacity and quality of Philippine infrastructure, e.g. expansion of existing airports, seaports, and highway systems, would mean higher demand for construction services.

The sector’s labor productivity, measured as the ration of gross value added of construction to employment, had recovered from its negative growth of -10.6 percent in 2011 and boosted its efficiency by 7.6 percent in 2012.

This means that the additional output created by the sector supersedes the corresponding increase in the sector’s employment.

In terms of compensation, the sector still provides one of the lowest (next to mining) average daily basic payment among other industries.

But while the average daily compensation for the sector had increased by three to four percent in the last three years, inflation may just offset the benefits of the wage increase. /JMD (FREEMAN)