Delta poses risk to construction rebound

THE Philippine construction sector is expected to rebound “strongly” this year, but the outlook is threatened by the Delta-driven surge in coronavirus disease 2019 (COVID-19) infections and stricter lockdowns, Fitch Solutions Country Risk & Industry Research said.

Fitch Solutions said in a note on Thursday that the Philippine construction industry is forecast to grow by 24.2% this year, bouncing back from the 25.7% slump in 2020.

“We stress that infrastructure remains at the core of the Philippine government’s plans to revive the economy, and will support our near-term growth outlook,” the think tank said.

The construction sector rose by 25.7% in the second quarter, the highest since the 26.6% growth in second quarter of 2010, mainly due to the low base in 2020. Fitch Solutions, however, said this was still a good indicator of a “very strong recovery” for the industry.

“We expect transport infrastructure, particularly rail and road development, to be the key driver of infrastructure and construction growth over the coming years,” it said.

However, Fitch Solutions flagged downside risks arising from the Delta-driven virus surge and lockdown measures which may weaken the industry’s growth in the second half.

“We have yet to factor this development into our forecasts as many projects have continued to register strong progress as of the time of writing, but the situation remains highly fluid and we may revise our forecasts downwards if necessary, over the coming weeks,” it said.

Metro Manila was under a two-week enhanced community quarantine (ECQ) in August as the government sought to curb the spike in COVID-19 cases.

Unlike last year, the government allows construction work on all essential public and private projects to proceed even during the lockdowns this year. It only banned small-scale projects in areas under ECQ and modified ECQ.

The government is pinning its economic recovery hopes on infrastructure as it increased spending for flagship projects under the Department of Public Works and Highways (DPWH) and Department of Transportation (DoTr).

The DPWH has a proposed budget of P686.1 billion for 2022, up 1.4% from this year’s budget. The DoTr’s proposed budget for 2022 stands at P110.9 billion, 26.2% higher than this year’s allocation.

“Duterte’s ‘Build, Build, Build’ program will remain a key policy driving investments in the construction sector, while the progress on the execution of projects will have a heavy influence on growth of the sector over the short term,” Fitch Solutions said, citing the robust pipeline of projects in the next few years.

The Duterte administration approved the revised list of 112 priority projects worth P4.687 trillion in May, 29 of which are targeted for completion within the current administration, 51 are ongoing and 28 are in the pipeline.

“Based on our Infrastructure Key Projects Database, transport projects account for nearly 75% of the total value of the Philippines’ infrastructure project pipeline, at approximately $118 billion, with rail projects alone accounting for 33%,” Fitch Solutions said.

The think tank noted the construction sector’s growth will likely be sustained next year but at a slower pace of 16.1%.

Public spending on infrastructure surged by 43% to P426.6 billion in the first half from P298 billion a year ago. This also exceeded the P420-billion six-month target by 1.7%. — Beatrice M. Laforga