Pickup in construction activity seen after slow Q1 growth

MANILA, Philippines - Construction activity is seen picking up in the coming months after a slow down in the first quarter, the research arm of Metropolitan Bank & Trust Co. said.

“Despite the slow start, construction activity while likely pick up towards the end of the year and in 2015 as another election period begins,” Mabellene Reynaldo, research analyst at Metrobank, said in the latest Weekly Views from the Metro.

Reynaldo said construction activity would support further domestic economic expansion.

“Even with slower construction activity, expect real estate services, its downstream activity, to still grow faster than most industries as companies continue to sell existing supply and as growing incomes continue to spur demand,” she said.

“A downside risk to construction performance this year however is the slower-than- expected pace of rebuilding in typhoon-damaged areas,” Reynaldo said.

The value of construction projects went up by 4.3 percent to P61 billion in the first quarter, but Reynaldo said growth would likely be “steady” for the rest of the year.

“The slower new private construction approvals may lead to a lower construction value-added come the second quarter results,” she noted.

“Assuming the lag between the time of building approval and the actual building operation, the contraction posted in building approvals in the last quarter of 2013 has influenced private construction gross value-added in the first quarter of 2014 to contract by 3.3 percent year-on-year at current prices,” Reynaldo said.

At the same time, despite rebuilding efforts following the devastation of Super Typhoon Yolanda late last year, the analyst said approved construction projects in affected areas contracted in the first quarter.

“In the wake of Typhoon Yolanda, value of new private construction approvals in Eastern Visayas contracted by 33.2 percent, suggesting that reconstruction efforts (on the private end) are still not gaining momentum,” Reynaldo said.