KUCHING: While the construction sector’s development expenditure for 2018 has been set at a flattish growth of 0.2 per cent year over year (y-o-y), it is still the highest posted level in the past 6 years and will help the construction sector boom to continue on into 2018.
“(It) should help to sustain nominal construction output given its strong correlation of 71 per cent to development expenditure,” Hong Leong Investment Bank Bhd (HLIB Research) detailed in an industry insight report.
And further complementing the argument for a structural boom to continue, HLIB Research adds that the sector also enjoys health financing flows as loan disbursement and approvals were seen growing at 13 and 20 per cent y-o-y – indicating that financing continue to be available.
Additionally, the research arm also identified several mega jobs worth RM168 billion to be on the cards in the near term.
“In our view, the East Coast Railway Line (ECRL) at RM55 billion and Pan Borneo Sabah Highwayat RM13 billion should take off this year while the High Speed Rail (HSR) at RM60 billion and MRT3 at RM 40 billion will be implemented in 2019.
“While some of the projects will be led by foreigners, we have estimated the overall local content of these projects to stand at RM85 billion or 51 per cent of all project values,” said the research arm.
That being said, it is expected that domestic contract awards to listed contractors will float around RM25 to 30 billion this year compared to the total RM29 billion observed last year.
With tailwinds a plentiful in the construction sector, HLIB Research opined that outperformance of the sector will continue on in2018 with real construction growth at 9 per cent onn back of an overall Gross Domestic Product (GDP) of 5.3 per cent.
Looking forward, the sector will continue on doing well in the short term as there is currently another RM126 billion left to be spent in the two remaining years of the 11th Malaysia Plan (11MP).
“Assuming this is spread equally over two years, this equates to RM63 billion per capita, a strong potential jump of 37 per cent in 2018,” said HLIB Research.