The world economy: Powered by the construction industry for the next decade.

A new report says that the next decade will be defined by a construction powered economy, as residential building activity drives near-term growth and infrastructure investment bolsters long-term growth.

According to Oxford Economics’ latest forecasts, global construction output will grow by 35 percent from $US10.7 billion in 2020 (constant prices) to $US15.2 billion in 2030.

Oxford said that global construction activity declined by 4.3 percent from calendar 2019 to calendar 2020 due to the worldwide pandemic.

Despite this, the construction sector is expected to grow by 6.6 percent in 2021, and the global construction market will grow by US$1.75 trillion over 2022 and 2023.

Global construction spending is forecast to grow by $US1.7 trillion between 2022 and 2023. The construction sector is forecast to grow by 4.4 percent from 2025 to 2030 and 3.5 percent from 2030 to 2050.

As a result, Oxford Economics expects the construction industry to grow faster than both manufacturing and services, with growth centred around the four key countries of China, India, the US, and Indonesia.

This combination of markets is expected to drive 60 percent of construction growth over the next decade. Whilst China and the US will continue to dominate the market by size; developing nations will grow in importance.

In 2023, India will surpass Japan as the third-largest construction market in the world. By 2030, Indonesia will overtake Germany, the United Kingdom, and Japan as the fourth-largest market.

According to Oxford, the residential sector will drive activity growth in the near future.

In terms of dollar value, this is the largest subsector of the construction market in 2020, accounting for 44 percent of overall construction output.

The sector is experiencing a rise in housing prices as pent-up demand from the pandemic boosts the industry.

Although the economy has been halted in the early stages of the pandemic, Oxford says many households have accumulated savings.

Through the release of these savings, renovation activity will increase, and residential space will be enlarged.

Growth will be driven by infrastructure in the medium term.

There is expected to be an increase of 6.8% in activity in this sector in calendar 2021. In percentage terms, this makes it the fastest-growing industry – though residential contribute a more significant dollar value to growth in absolute terms.

For the decade, output growth will come in at 4.0 percent.

Oxford says most actions will come from developing economies, even though stimulus-related expenditures drive healthy activity levels in developed markets.

Over the decade, the compound annual growth rates for countries like India and Indonesia are expected to be 9.6 percent and 8.2 percent, respectively.

Energy, transportation networks, sewage systems, and other large-scale projects will drive growth in these markets.

In non-residential buildings, recovery will occur more slowly.

Although growth in this sector is expected to pick up in the latter half of the decade, Oxford Economics says growth over the next five years to 2025 will remain subdued as slowing international travel and a shift toward working from home have put a halt to many office projects.

In addition to forecasts of specific activity, Oxford says several trends will emerge in the construction sector.

In emerging markets, population growth will drive construction demand.

Additionally, permanent inward migration will support construction demand across the Anglosphere and other developed nations.

The need for workplace construction is fueled by a growing working-age population, while multifamily residential buildings are anticipated to grow as more people are moving back to urban centres.

Finally, Oxford says climate change and the race to NetZero will be a challenge for the sector as emissions associated with construction materials are expected to rise because of the more significant number of buildings being constructed.

Graham Robinson, Global Infrastructure and Construction Lead at Oxford Economics and lead author of the report, said the importance of construction to the global economy should not be underestimated.

“It’s unusual to see construction outstripping growth in both services and manufacturing over a sustained period,” Robinson said.

“But it’s not surprising that construction is expected to power the global economy over this next decade, considering the unprecedented nature of stimulus spending on infrastructure by governments and the unleashing of excess household savings in the wake of COVID.

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