The public sector looks set to pump-prime the construction industry with a strong supply of contracts.
The Building and Construction Authority (BCA) yesterday said construction demand could come in at between $27 billion and $34 billion this year. Of that, about 65 per cent is expected to be from the public sector. This would be the highest proportion of construction demand from the sector since 2002.
"Despite the slowdown in private sector construction demand, there is still a strong pipeline of public sector projects," said Mr Desmond Lee, Senior Minister of State for Home Affairs and National Development. He told a seminar jointly organised by BCA and the Real Estate Developers' Association of Singapore that the "sustained and healthy" pipeline of projects presents an opportunity for the industry to innovate, and the public sector will take the lead in driving productivity improvements.
CIMB Private Banking economist Song Seng Wun told The Straits Times the forecast is a "confidence booster" for the industry amid an environment of slower growth.
This year's projects include the new National Cancer Centre, State Courts' new building in Havelock Square, JTC's Integrated Logistics Hub, PUB's water reclamation and sewerage works, Changi Airport's three-runway system, and the remaining contracts for the Thomson-East Coast MRT line.
Demand from the private sector will likely slow due to weaker economic conditions and an increased supply of completed housing projects and offices, BCA noted.
Last year, construction demand fell short of expectations owing to the deferment of some major public contracts, such as MRT projects.
Construction contracts awarded last year came to about $27.2 billion, lower than an initial projection of $29 billion to $36 billion. Slightly more than half of the contracts were awarded by the public sector, at $14 billion, while $13.2 billion were private sector deals.
BCA said total construction output or progress payments for work done last year was high at about $35 billion, due to strong demand in the preceding two years. This contributed to about 4.7 per cent of GDP in 2015. This year's construction output is expected to fall to between $32 billion and $34 billion, partly due to last year's lower demand.
"The construction sector accounts for about 5 per cent of GDP, so the projection is unlikely to have a big swing on the overall economy, but every dollar counts," said UOB economist Francis Tan.
For next year and 2018, BCA expects average construction demand to be sustained at between $26 billion and $35 billion.
It estimates the public sector will account for between $16 billion and $20 billion of construction demand per year from 2017 to 2020. Of these, 60 per cent will be from building projects and the rest from civil engineering works, such as the North-South Expressway and associated infrastructure works for Changi Airport Terminal 5.
BCA chief executive John Keung said: "I think many of our construction companies are quite adaptable, and quite a number... also have a lot of civil engineering capabilities."
This article was first published on January 16, 2016.
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