Global construction industry risk still rising

Vania Goncalves 24 Mar 2017 GLOBAL BUSINESS

The global construction industry risk levels have risen for the fifth consecutive quarter, according to Timetric’s Construction Intelligence Center (CIC).

CIC’s Construction Risk Index (CRI) - Q1 2017 Update reveals that the global average risk score rose from 41.88 in Q4 2016 to 41.98 in Q1 2017. It looked at the degree of risk faced by construction industries of 50 developed and emerging economies around the world.

The Q1 2017 update also concluded that risks levels in advanced economies have slightly eased, falling to 33.37 from 33.73, while increasing from 49.46 to 49.96 in emerging markets.

Switzerland and Sweden, with a very low risk level, are considered to be in a robust state, being rated A1. Hong Kong, however, was among the worst performers in the Q1 2017 update dropping two places to 7th, with anxiety building over China’s economic slowdown.

In total, 23 countries recorded a deterioration in their risk profile in the Q1 2017 update. Mexico and Turkey recorded the sharpest drops. Turkey’s economy is struggling amid political turbulence and the sharp fall in the Turkish lira. Mexico’s woes stem from the potential negative fallout from the US president’s protectionist policy measures.
 
There were 24 countries that have recorded improvements in their risk profiles in the latest CRI update. Poland recorded a sharp worsening in its risk score in 2016, but has now improved due to the loosening in fiscal policy and the potential for a pick-up in investment. Ireland’s economy continues to perform well, and after a steady worsening in its risk profile in 2015–16, Finland’s fortunes are starting to improve.
 
The risk score for the US has improved marginally, and it moves into 5th place. The US economy will continue to perform well, and there will be a boost to the construction industry if the new president, Donald Trump, progresses with large-scale infrastructure spending plans. However, the risk level in general is still higher than it was before Trump was elected, as there are concerns over the relatively high level of policy uncertainty.

According to Danny Richards, CIC’s lead economist, rising interest rates can pose a challenge for the global construction industry. “Inflationary pressures are intensifying across major markets, and monetary authorities have started, or are set to embark on, a process of monetary policy tightening,” he said.

The Construction Risk Index (0=lowest risk; 100=highest risk)

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