Construction sector declined 9.6% in August this year, recording eight straight months of negative growth and accumulating a contraction of 9% between January and August, Scotiabank reported.
"This result was below our expectations, mainly due to the weak spending in the self-construction segment, which represents 70% of domestic cement consumption, and due to a low level of public investment execution by sub-national governments, mainly by local governments," the bank explained in its weekly report.
Considering August's information, the Canadian capital company predicted that the construction sector would contract 6.4% in 2023.
However, it estimates that the sector will reduce its rate of contraction in the fourth quarter of 2023 due to:
i) The expectation in the development of preventive works to face El Niño Phenomenon in the summer of 2024.
ii) The higher level of investment in awarded infrastructure projects.
iii) The possibility of higher dynamism in the formal real-estate sector in light of the decline in prices of construction materials and the gradual drop in interest rates on mortgage loans.
Scotiabank forecasts that the sector will return to the growth path in 2024 with greater dynamism from the second quarter of this year.
"All this, taking into account that, in the first quarter, eventual heavy rains along the northern coast would affect the normal implementation of projects, as well as the transportation of cement in light of a potential temporary interruption of roads," it explains.
Added to this is the expectation of the gradual improvement in private investment, which is expected to grow again next year (2%), driven by non-mining investment.
Finally, the bank foresees a higher level of public investment execution at the three levels of government.
(END) JJN/JJN/RMB/MVB
Published: 10/24/2023