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18 May 2023

Econ Digest

Total value of construction investment in 2023 may shrink amid political uncertainty, it may reach THB1.34 trillion or shrink by 2-1%YoY


        KResearch projects that total value of construction investment (of the public and private sectors) in 2023 may reach approximately THB1.34 trillion, shrinking by 2.0-1.0%YoY. The contraction is mainly due to public construction investment that may decrease amid political uncertainty, especially pertaining to the official results of the general election, the formation of a new government, and changes in key positions in Thai politics. This will affect the fiscal 2024 budget and may result in the deferral or suspension of disbursement of public investment expenditure this year. In addition, public construction projects may be reconsidered in the event of new budget allocations. KResearch thus projects that total value of public construction investment may shrink by 3.5-2.5%YoY.

        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 in major provinces. Meanwhile, residential projects must maintain a cautious stance amid market concerns over purchasing power and the 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 experience delays or interruptions. Plus, new projects awaiting the government’s consideration may not be able to start construction within this year, causing the value of private construction investment to remain unchanged or shrink by 1.0%YoY.
        KResearch holds the view that the anticipated contraction in total construction value for 2023 will affect the operating income of construction companies to varying degrees. This is dependent on several factors, especially the types and progress of existing construction projects. Another challenge is effective cost management, including the persistently high prices of construction materials and the potential minimum wage increases. The cost burden could affect the profitability and debt servicing ability of businesses going forward.

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Econ Digest