2017 REPORT 2018 OUTLOOK
CONSTRUCTION SECTOR
MACh 47 D ECEMBER 20 17
1.1
2017 REPORT - OUTLOOK 2018
INVESTMENT IN CONSTRUCTION 2017
- 1.8% annually
Estimated behavior of aggregate investment on construction in 2017 compared to 2016.
2018
2.4% anually
Projected behavior of aggregate investment on construction in 2018 compared to 2017 (base scenario).
With this result - which considers an annual 3.5% decline in aggregate infrastructure investment and an annual decline in aggregate investment on housing of -1.7% - the construction sector registers its third consecutive year of negative growth.
This positive evolution can be explained by the effect of having a smaller comparison base and an expected increase in aggregate investment on both infrastructure as well as housing: 2.7% and 1.8%, respectively.
Key to this contraction has been the reduced investment on productive infrastructure, especially private productive infrastructure (not associated with public companies).
In particular, the recovery of expectations and the increased activity in project studies could be anticipating the expected growth of private productive investment on infrastructure.
1.2
2017 REPORT - OUTLOOK 2018
SECTORAL EMPLOYMENT 2017
2018
9.8%
9.3%
Estimated unemployment in construction sector in 2017 compared to 2016.
Projected unemployment in Construction in 2018.
average
average
This is the highest level registered since 2010 and is essentially explained by the scant renewal of projects and low levels of private real estate development activity.
The recovery in sectoral activity that is expected for 2018 will go hand-in-hand with a decline in the unemployment rate and an increase in employment levels (3.4%) compared to 2017.
This resulted in a slowdown in the recruitment of workers on the part of large and medium-sized companies and a total increase in the number of self-employed workers.
The improved outlook for the sector, related to an increase in the number of investment projects, will make labor market conditions more favorable.
0,0 0,2 0,4 0,6 0,8 1,0
2.1
2017 REPORT - OUTLOOK 2018
PUBLIC INFRASTRUCTURE 2017
2018
1.1
%
Estimated behavior of the annual investment on public infrastructure in 2017.
2.2
%
Projected behavior of aggregate investment on public infrastructure in 2018 compared to 2018 (base scenario).
The result is consistent with the slight increase in the funds allocated to public infrastructure investment on the 2017 Budget Law - measured in real terms - with regard to 2016.
Investment on sanitary infrastructure like building a desalination plant to supply drinking water in Atacama and the Aguas Andinas investment plan in the Metropolitan Region, will be fundamental.
Another thing that influenced matters was the less demanding foundations for comparison, in line with the fiscal adjustment experienced in 2016.
The above would to a great degree compensate the lower real investment on public works and concessions that is to be expected according to the 2018 Budget bill.
2.1
2017 REPORT - OUTLOOK 2018
PUBLIC INFRASTRUCTURE FNDR 2017
2018
US$954 million
US$984 million
he budget assigned to the National Regional Development Fund (FNDR) for 2018 remains almost unchanged in real terms (0.5%) compared to 2017. The Los Rios and Maule Regions are the hardest-hit in terms of budgeted investments in the 2018 Budget bill (-13% and -25%, respectively).
CONCESSIONS Investment flow
US$763 million
US$613 million
The expected decline for 2018 is explained, among other factors, by the completion of relevant works and the scant incorporation of new projects. The main projects that are to be concluded in 2018 are the West Santiago (former FĂŠlix Bulnes) and the Antofagasta Hospitals, in addition to Route 43, La Serena-Ovalle.
2.2
2017 REPORT - OUTLOOK 2018
PRIVATE INFRASTRUCTURE* 2017
2018
-6.9% Estimated behavior of the annual investment in private productive infrastructure in 2017.
2.8% Projected behavior of aggregate investment on private productive infrastructure in 2018 compared to 2018 (base scenario).
Investment in larger projects amounted to US$10.898 billion in 2017 - of which US$ 5.69 billion corresponded to construction expenses - far less than the US13.503 billion in 2016.
Investment on private productive infrastructure that is associated with larger projects is expected to reach US$ 9.133 billion, of which US$4.938 billion would be construction expenses.
However, these numbers practically double when smaller projects - representing investments of less than US$5 million - are considered.
This lower dynamism would be compensated by the implementation of medium-sized and small projects not registered, whose investment we estimated could surpass that of large projects.
(*) Includes investment in public companies (Codelco, Enami and Enap) and in private companies in different productive sectors.
0,0 0,2 0,4 0,6 0,8 1,0
3.1
2017 REPORT - OUTLOOK 2018
PUBLIC HOUSING INVESTMENT 2017
2018
-1.7%
-2%
Estimated behavior of the annual investment on public housing in 2017.
Projected behavior of aggregate investment on public housing in 2018 (base scenario).
This result is consistent with the contraction in the public budget - measured in real terms - that was in 2017 compared to 2016.
This result is directly related to the decline in real spending budgeted for public housing in 2018.
In particular, resources for programs aimed at vulnerable and middle-class sectors were cut.
The decline in projected housing investment associated with housing policy can be explained in particular by the budget cut implemented in programs for middle-class sectors (-13%).
3.2
2017 REPORT - OUTLOOK 2018
PRIVATE HOUSING INVESTMENT* 2017
2018
2.6% Estimated behavior of the annual investment on private housing in 2017.
2.8% Projected behavior of aggregate investment on private housing in 2018 (base scenario).
After a very dynamic 2015, due to the anticipated entry into effect of a new tax - VAT on housing real estate activity declined sharply in 2016 and tended toward normalization in 2017.
The submission of new real estate projects in the second half of 2017, which has been greater than expected, will be fundamental to the behavior of this subsector in 2018.
Consistent with a greater dynamism in demand, especially in the market for apartments, investment in private housing - and, consequently, the implementation of new projects - has tended to recover.
They also anticipate a positive effect from the increase in the number of housing construction permits issued compared to previous years and the recovery of expectations related to the sector.
(*) Includes investment in housing to be financed only with mortgage or partially with a state subsidy.
0,0 0,2 0,4 0,6 0,8 1,0
4.1
2017 REPORT - OUTLOOK 2018
EXPECTATIONS
CONSTRUCTION IMCE (Business Confidence Indicator) Current situation 80
80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
2010
DEMAND SITUATION
2011
2012
LEVEL OF ACTIVITY (3 MONTHS)
2013
2014
2015
COMPANY'S GENERAL SITUATION
0
COMPANY'S FINANCIAL
Source: CChC, based on Universidad Adolfo Ibáñez and Icare.
Despite the fact that the confidence of construction sector businesspeople remains pessimistic, it has shown signs of significant improvement in the last quarter of 2017, though the persistently low dynamism in demand continues to stand out.
It is hoped that this relative recovery in business confidence is in the short term translated into the arrival of diverse private productive investment projects of smaller size.
2017 REPORT 2018 OUTLOOK
CONSTRUCTION SECTOR
Investment in construction fell for the third consecutive year in 2017, mainly thanks to the lower implementation in the number of private productive infrastructure projects. A base scenario of 2% growth is projected for 2018.
MACh 47 D ECEMBER 20 17