Construction starts fall on weak confidence

construction workers

CONSTRUCTION starts, as measured by permit approvals, fell sharply in the fourth quarter, headlined by a 20% decline in the largest segment, residential buildings, as commercial construction declined nearly 32%, the Philippine Statistics Authority, noting disruption and reduced confidence due to the pandemic.

Approved building permits in the three months to December period totaled 31,026, down from 39,242 a year earlier.

The building projects were equivalent to 5.78 million square meters of space and were valued at P62.96 billion. The estimated value was down 46.6% from a year earlier.

Residential construction, which accounted for 70.6% of all approved building permits, declined 20% year on year to 21,892 permits. The value of all approved residential projects was P32.61 billion.

Permits to build duplexes/quadruplexes fell 69.8% to 255, followed by residential condominium (minus 64.1% to 14), apartments/accessorias (minus 46.3% to 2,010), “other residential” buildings (minus 31.9% to 32), and single houses (minus 13.7% to 19,581).

Non-residential construction declined 29.4% to 4,670 permits. Non-residential buildings for which permits were sought were valued at P25.95 billion.

The commercial category contracted 31.9% year on year to 2,854 permits. Permits to construct institutional buildings fell 30.6% to 961, followed agricultural buildings (minus 27.4% to 183), industrial buildings (minus 16.7% to 533), and “other non-residential” buildings (minus 10.3% to 139).

Permits to add to existing structures dropped 66.1% to 465, while permits to make alterations and repairs rose 2.9% to 3,999.

The Calabarzon region — composed of the provinces of Cavite, Laguna, Batangas, Rizal, and Quezon — had the highest number of approved permits with 6,368. The Ilocos Region and Central Luzon followed with 4,199 and 3,589, respectively.

John Paolo R. Rivera, an economist with the Asian Institute of Management, said the decline in construction activity reflects shaky confidence in the economy due to the pandemic.

He also cited possible factors like “liquidity constraints, rapid increases in inflation,” which reduced builders’ confidence in making significant financial commitments, Mr. Rivera said in an e-mail.

Inflation in the fourth quarter averaged 3.1%, the highest since the 3.8% recorded in the first quarter of 2019. Meanwhile, inflation in January and February came in at 4.2% and 4.7%, respectively. The February was the highest since the 5.1% posted in December 2018 and was attributed to higher food prices and transport costs.

“Unless we reduce economic uncertainties, a declining trend is possible. Construction companies must also feel the confidence that economic prospects (are improving),” Mr. Rivera said, referring to the 6.5% to 7.5% growth target set by the government’s economic managers this year, as well as the 8% to 10% target in 2022.

“Recovery is conditional on initiatives by the government to manage and contain the pandemic that will regain trust and confidence in the economy,” he added. — Marissa Mae M. Ramos