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12 May 2023

Real Estate and Construction

Total value of construction investment in 2023 may shrink amid political uncertainty (Current Issue No.3409)


        KResearch projects that total value of construction investment (of the public and private sectors) in 2023 may reach approximately THB 1.34 trillion, shrinking by 2.0-1.0 percent YoY. The contraction is mainly due to public construction investment that may decrease amid political uncertainty, especially regarding the official results of the general election, formation of a new  government, and changes in key positions in the Thai politics. This would affect the fiscal 2024 budget and may result in deferral or suspension of disbursement of public investment expenditure this year. In addition, public construction projects may be reconsidered in case of new budget allocations.
        Private investment in 2023 is expected to remain stable, driven partly by commercial property construction, particularly in mixed-use projects as well as hotel and retail development projects to support the tourism recovery. Meanwhile, residential projects must maintain a cautious stance amid market concerns over purchasing power and rising interest rates. As for ongoing infrastructure projects under the public-private partnership (PPP) scheme, some projects are likely to remain on track while others may see delays or interruptions. Plus, new projects awaiting the government’s consideration may not be able to start construction within this year.
        KResearch holds the view that the likely contraction in total construction value for 2023 would affect operating results of construction companies to varied extents. It depends on several factors, especially types and progress of existing construction projects. An additional challenge is effective cost management, including persistently high prices of construction materials and potential minimum wage increases. The cost burden could affect profitability and debt servicing ability of businesses going forward.

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Real Estate and Construction