Global Economic Growth
At the global scale, economic recovery is expected to be strong but uneven across economy groups. After a contraction of 3.5 per cent in 2020, the global growth is set to hit 5.6 per cent in 2021—the strongest rebound post-recession in 80 years—which is then followed by a steady growth at 4.2 per cent in 2022. The rebound is particularly pronounced in the advanced economy group such as the US and OECD countries, reflecting the strong fiscal support together with widespread vaccine availability compared to the emerging market and developing economy groups.
In Asia, China’s GDP growth is expected to strengthen, with the driver shifting from investment to private consumption. Within Southeast Asia, economies such as Malaysia, Indonesia and Thailand are projected to recover supported largely by external demand, but the extent of the recovery in each country hinges on its respective COVID-19 situation. In both Singapore and Malaysia, the recent tightening of domestic restrictions and border controls represents a setback, but the broader economy should still see a recovery in tandem with the global economic rebound.
Against this backdrop, the pace of recovery is also uneven across the various sectors of the economy. Construction is now more prepared to deal with the pandemic impacts. Governments in Malaysia and Singapore have developed multi-pronged business continuity plans, and rolled out and sustained the support initiatives; so, despite larger-than-usual degree of uncertainty over the course of the pandemic, the sector is likely to survive and thrive in the remaining 2021.
Malaysia Construction Outlook
The decline in construction commencements in Malaysia in 2020 at approximately 20 per cent (MYR 57,747 million) was mainly due to the Movement Control Order (MCO) and other impacts of COVID-19. In 2021, the total construction starts are expected to grow at an estimated 13 per cent (MYR65,339 million). The outlook on the industry this year has initially dampened, but the revival of major infrastructure and high impact projects has been expected to drive growth in the second half of the year, including the potential renewal of the Mass Rapid Transit 3 (MRT 3). The foreseen economic rebound is also supported by an accommodative monetary policy, the recovering external environment and government stimulus packages.
However, the number of cases has been surging recently despite the roll out of the vaccination programme. To curb the transmission, MCO 3.0 has been put into place, followed by a total lockdown from 1 to 14 June 2021. This has added pressure on project timelines and resources among other concerns, so high expectations should be taken with caution. It also remains imperative that architecture firms and property developers continue to stay alert and be resilient. The BCI Asia Awards 2021 winners have shown how goals are still achievable despite the obstacles posed by the pandemic. Companies’ resilience coupled with the government continuous supports are indeed key success factors of the economic recovery.
During MCO 3.0, the government allowed essential construction works to continue, which includes infrastructure related to electricity projects, telecommunications, dams, drainage and sewerage, oil and gas. The construction of utilities is projected to rise substantially as Malaysia invests in, for example, multiple solar farms across the country and on its waters; and will tap into other forms of clean energy, such as hydroelectricity. Similarly, total civil construction starts are seen to reach a 12 per cent gain (MYR17,123 million) and building construction starts are anticipated to rise at a rate of more than 13 per cent (MYR48,215 million).
As shown in the chart, the industrial sectors are recovering well at 22 per cent, denoting MYR25,543 million. The sector’s outlook is positive following, among others, the latest developments of Malaysian Vision Valley (MVV), bundled with relevant infrastructure projects where about 2 million square feet of new logistic and warehousing facilities are expected to enter the Klang Valley market. Likewise, the residential sector is expected to see growth of about 21 per cent or MYR3,893 million. The work-from-home arrangement remains in place because of the MCO and this, perhaps, increases the demand for larger living spaces and home offices.