Mexico's Construction Industry Has Been Impacted By Reduced Public Spending But Medium To Long Term Growth Prospects Are Positive

The construction activity shows slower activity than the economy largely due to fall in public spend by nearly 11% since Q3 2017 to Q2 2018. Public investment is expected to rebound as the new government, plans to bridge the infrastructure gap of over US$ 600 billion is expected to improve the condition of the industry.

Although the outgoing government completed 85% of its National Infrastructure Plan, low spending continues to remain a problem. Under the new government (AMLO), growth can be expected in 2019 and 2020. Other programs include earthquake reconstruction and development that will lift the residential sector.

The construction industry in value terms increased at a CAGR of 0.8% during 2014-2018. Over the forecast period of 2019 to 2023, the industry is expected to record a CAGR of 2.6%, increasing from MXN 2,975 billion in 2019 to reach MXN 3,299 billion by 2023.

The medium to long-term growth prospects of Mexico remains favourable, emerging steadily from slow growth in 2017-18. Reconstruction after the 2017 earthquakes, construction of the New International Airport for Mexico City (NAICM) and the government's special economic zones policy are all expected to drive demand over the forecast period.

The authorities have committed to reform and prudent macroeconomic policies. With Mexico's open policies, private investment is set to increase in the coming years for a number of infrastructure projects across the country. The public sector budget cuts in the current year will be filled by private investment from both domestic and foreign sources to drive infrastructure industry growth over the next five years. The government continues to adopt more liberal policies and innovative financing models to realize its infrastructure strategies which will increase the role of the private sector.

Uncertainty over NAFTA has settled as negotiations have concluded. This is expected to drive foreign investment in Mexico. Mexico received an FDI of US$ 29.7 billion during 2018 which was a 11% increase compared to previous year. Mexico has managed to grow at an acceptable pace showing economic stability unlike its neighbouring countries. As Brazil continues to be engulfed in deep-set corruption and economic troubles, Mexico will see its position rise among the emerging countries in Latin America which is expected to reflect in increased foreign investments. The opening up of the oil and gas sector to foreign investment will additionally benefit the infrastructure and construction industry in spite of low prices and current economic scenario. Overall, Mexico's solid economy, political stability and positive medium to long term prospects are key in attracting foreign investments.

Economic reforms that safeguard investment operations despite uncertainty in the global investment environment have been taken. The new government's aim to improve the infrastructure primarily through PPP will also bring a number of opportunities.

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This release was published on openPR.