Construction to contract 5.5% in Latin America

With the emergence of Covid-19 and its continued spread across the region, Latin America’s construction output is now expected to contract by 5.5% this year, according to GlobalData.

Before the Covid-19 pandemic, GlobalData had expected construction output in Latin America to recover to 2.3% in 2020, up from -1.1% in 2019 as construction activity, especially in Brazil, the region’s largest market, was increasing.

In IHS Markit’s economic outlook in the April issue of International Construction magazine Scott Hazelton wrote that Latin America would suffer serious economic issues due to Covid-19.

He wrote that, “Our forecast calls for Brazil’s GDP to contract 1.0% in 2020 before inching up 0.2% in 2021. A stronger recovery will begin in 2022 with growth of 2.2%.”

On Argentina Hazelton wrote, “Argentina was in recession before the coronavirus impact, and the one-year outlook is dark. Financial instability in Argentina is mostly the result of deep and prolonged fiscal and external deficits, but the situation is exacerbated by contagion from international financial conditions, where sentiment is turning wary of risks in emerging markets.

“Adding to the perils is the arrival of COVID-19, which will deliver a blow to the already ailing economy, especially on private-sector consumption.”

Dariana Tani, economist at GlobalData, said, “Argentina is set to see the sharpest decline in output this year, declining by 10% in real terms, while output in Mexico and Brazil is expected to fall by 8% and 6%, respectively.

“Slower global demand, plummeting commodity prices, and currency devaluations due to a surge in capital flights, combined with significant drops in tourism and remittance levels and rising unemployment are among the main factors expected to impact the industry in the short term.”

According to the International Monetary Fund, economic activity in Latin America is expected to decline by 5.2% in 2020 amid challenging external conditions and the much-needed lockdown measures to contain the spread of the pandemic.