Issue Focus

In 2019, the amount of domestic construction contract is expected to fall 5.8% compare to last year. Especially, the second half’s construction contract will fall 13.3% YoY and it will lead a trend of decline in this year. Because of 2019’ decline, construction contract will continue to decline since 2017, for three years. 2019’s domestic construction contract(145.5 trillion won) is expected the lowest amount in five years. Even though the increased orders from urban regeneration projects and social infrastructure projects orders from public sector, private sector will continue to decline substantially, especially in the residential and commercial buildings. Public orders are expected to increase by 9.8% through increasing in urban renewal business and social infrastructure projects orders. Private orders are expected to decline by 11.8% YoY due to sluggish construction orders, including housing orders, and will reach the lowest amount in five years. By construction type, civil engineering orders are expected to climb 5.1% YoY due to an increase in government SOC budget, large PPP projects, and large private plant orders. Housing orders are expected to decline 12.0% YoY on the back of strengthened housing / real estate regulations, the increase number of completed new apartment houses and sluggish macroeconomic recovery. Non-residential building orders were affected by negative factors such as macroeconomic slowdown, the decline in orders from the officetel construction projects, and statistical ineffectiveness due to robust order receipts in the previous year, it will decline 8.9% YoY. Construction investment in 2019 is expected to decrease by 4.1% from the previous year and to decrease for the second consecutive year since 2018. Real construction investment in 2019 is expected to be sluggish, with a four-year low since 2015. Given that construction orders, the leading indicator, will continue to decline in 2019, construction investment is expected to continue to decline in 2020. In 2019, the decline in the construction industry is expected to be very rapid, and macroeconomic and employment impacts will be significant. So, appropriate policy responses are deemed necessary. As construction investment in 2019 will decrease by 4.1%, it is estimated that 2019 economic growth rate will fall by 0.6%p and the number of employed will decrease by 138 thousands. In order to prevent the construction industries’ sudden fall, it is important that governments projects such as urban regeneration projects, social infrastructure projects be promoted swiftly, and PPP projects should be increased. It is also necessary to organize the increase of government SOC budget in 2020, and it is also necessary to prevent the plunging of housing investment by easing regulations.