With two forecast scenarios, Germany’s BauInfoConsult institute shows the possible effects of the pandemic on the German construction sector. The key construction indicators – such as construction investment or volume – are linked to GDP development in the long term. On the basis of various macroeconomic forecasts and their current correction downwards, similar developments in construction can be assumed. Only the intensity of the effects is questionable.
Assuming that the spread of coronavirus in China peaked in the first quarter of 2020 and outbreaks in other economically strong countries will also be somewhat under control by the end of the quarter, the OECD anticipates global growth to decline by 0.5%. As a result, global economic growth is expected to be 2.4% in 2020. And for Germany would be + 0.3%. In this case, the BauInfoConsult forecast model assumes that construction investment in 2020 could increase by 2.1% and construction volume by 2.2%. This would roughly result in a construction investment of € 331.2 billion and a construction volume of € 453.8 billion.
However, this mild overall scenario is becoming less likely from day to day. The focus is on the second scenario. In the event of a prolonged, more intense outbreak of the coronavirus, which continues to spread in the Asia-Pacific region, in Europe and North America, a global economic growth of only 1.5% can be expected in 2020. However, this negative variant would particularly affect Europe. If this situation arises, German GDP could slide into a slight recession with a minus of 0.3%. For construction, this would result in a minus of 0.4% in investments and in construction volume -0.5%. This would mean construction investment in 2020 will be around € 323 billion and the construction volume at around € 428 billion.
After all, the demand for construction in such a situation should decrease and also affect prices, which could return to normal levels.
Source: Internet
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