Colombia’s construction output falls at sharpest rate since 2000

18 May 2020 (Last Updated May 19th, 2020 09:56)

Colombia’s construction output falls at sharpest rate since 2000

Data released on 15 May by Colombia’s National Administrative Department of Statistics (DANE) showed that construction output in Colombia contracted by 9.2% in the first quarter of 2020, compared to -5.5% during the same period last year and an increase of 0.2% in the last quarter of 2019. This was the sharpest year-on-year contraction since the January-March quarter of 2000, when output fell by 11.7%.

Residential and non-residential buildings posted the largest drop at -16.5% while specialised works fell by 8.7%. Infrastructure, by contrast, grew by 9.1%. However, April figures are likely to be much lower, as it will reflect the broader effects of the quarantine restrictions imposed by the Colombian government since 24 March, to contain the spread of the coronavirus.

Before the pandemic, the infrastructure market was growing at double digits rates, posting an increase of 11% in 2019 amid higher public spending and major progress on projects that were underway. But considering the financial costs that the pandemic is generating, the resulting drop in fiscal resources is expected to have a negative impact on the sector this year.

DANE’s figures also showed that licensed area for the construction of buildings fell by 56.3% in March compared to March 2019; this was the lowest approved area for construction in the series of 302 municipalities, which began in January 2015. On a quarterly basis, the approved area for buildings fell by 14.2% in Q1 2020 compared to the same period last year. The approved area decreased 19.4% for non-residential and 12.7% for housing.

GlobalData forecasts Colombia’s construction output to contract by 5% in 2020, down from the previous forecast of -4% in the April update and -2.1% in 2019. The current forecast assumes that all construction projects will be reactivated by June and that the outbreak will mostly be contained by then.

On 10 May, the Colombian Chamber of Construction (Camacol) reported that during the first two weeks of reopening the construction sector, 1,723 building construction projects had been reactivated, accounting for 68% of the total projects.

However, in some regions, progress has been slow due to the restrictions that have been implemented at the local level to restart construction activities, including biosafety protocols to protect workers’ health and their families.

Workers in the construction and manufacturing sectors were allowed to return to work from 27 April, after two months of being paralysed, as part of the government’s efforts to restart the economy.

Colombia’s economy has been hit by two twin shocks of Covid-19 and a dramatic collapse in oil prices, as thousands of businesses have been forced to shut down due to the social distance restrictions to contain the spread of the disease. The quarantine restrictions, which were set to end on 4 May, has been again extended until 25 May. According to official data, urban unemployment rose by 13.4% in March.

Colombia’s finance ministry said on 4 May it now expects the economy to contract by 5.5% in 2020, a revision from its previous projection of -1.5% to – 2%. Colombia’s central bank has, nevertheless, a more pessimistic outlook, as it expects the economy to contract between 2% and 7% this year. In its latest monetary policy report, released on 5 May, the bank said that during the second quarter of 2020, the country’s GDP will fall between 10% and 15% compared to the 1.1% growth seen in the first quarter.