Coface Group


Central & Eastern Europe
Latin America
Mid-East & Turkey
Northern America
Western Europe
Change sector


  • World population growth
  • Persistent increase in urbanization
  • Overall accommodative monetary policies worldwide and low interest rates in advanced economies


  • The level of indebtedness of construction companies remains high, particularly in China
  • High household debt at the global level
  • Pro-cyclical sector, some segments of which are durably impacted by the consequences of the COVID-19 health crisis 

Risk Analysis

Risk Assessment

The coronavirus pandemic led to drastic containment measures affecting economic activity, including in the construction sector. Coface estimates a 4.8% contraction of world GDP in 2020, following a global economic growth of 3.2% and 2.5% in 2018 and 2019, respectively. Construction sites have mainly been affected by lockdown measures in the first half of 2020 (H1). While these restrictions were implemented at various degrees in different regions of the world, some worksites have not yet recovered to their pre-Covid-19 capacity, due to the health protocols in place and constraints related to remote working. The dynamics of the crisis and the impact on the recovery will be different depending on the segments of the construction industry, despite the pro-cyclical nature of the sector. Indeed, Coface expects a majority of private sector construction projects (households and companies) to be postponed or even cancelled because of economic uncertainty, rising unemployment in many parts of the world and falling income, which weighs on purchase and investment decisions.  Because of this double shock of supply and demand in the sector this year, the data analysis company Global Data estimates that construction activity worldwide is expected to contract by 1.4% in 2020. With the recovery now underway in many countries, partly thanks to government support and accommodative monetary policies, some  construction sector sub-segments such as the infrastructure one  should be more resilient than others, due in part to the key role of public infrastructure projects in stimulus packages. The majority of these stimulus packages are part of a continued  effort to 'decarbonize' the sector in order to address environmental challenges.


construction - PVC suspension prices
Sector Economic Insights
The health crisis is a large-scale negative shock on a pro-cyclical sector

The construction industry is pro-cyclical and has been hit by the global economic recession. Indeed, Coface anticipates a 4.8% contraction of the world economy in 2020 and a 4.4% rebound in 2021. In order to contain the epidemic and preserve the health of construction workers, governments made different choices regarding the management of construction sites. During the previous peak of the global crisis in the second quarter of 2020 (Q2), some countries decided to close construction sites (France, Mexico, Spain, etc.), while others only allowed the continuation of worksites considered essential, such as water supply, hospital building or energy infrastructure (Austria, El Salvador, for instance). Finally, in some countries, the construction sector was considered as essential and, therefore, sites remained open (this was the case in Brazil, Germany and Sweden, for example). These sites that remained open encountered difficulties and were sometimes delayed due to difficulties in the supply of certain inputs, border closures affecting the availability of workers, more medical leaves because of the health crisis and the health protocols imposed by the new organization of the worksites. Recovery in the short-term will be difficult for the same reasons, even though containment measures have been eased in many countries. Moreover, Coface expects investment in the construction sector to decrease by 14.3% worldwide between Q2 2020 and Q1 2021, with a more pronounced decline in Europe and North America compared to Asia. Projects implemented before the crisis could be delayed, such as China’s New Silk Road project (Belt & Road Initiative), which involves 138 countries since 2013 and mainly aims to link Asia, Europe and Africa to China.


Commercial real estate should be the segment most affected by the crisis

On the demand side, declining incomes and the climate of uncertainty facing households and businesses are weighing on the demand for residential and commercial buildings. Indeed, rising unemployment and precautionary savings should lead to lower demand for housing. Second-hand home sales, which account for about 90% of home sales in the United States, declined by 26.6% year-over-year in May, the strongest annual decline since 1982. Companies are cancelling or postponing investment projects in new infrastructure due to lower revenues and the uncertain environment.  Non-residential building construction, which was already decelerating since late 2019, is expected to be negatively impacted by the postponement of business investment. Furthermore, the increase in ‘remote working’ and ‘working from home’ because of the mobility crisis, linked to the health crisis entails that, on the one hand, current commercial leases might not be renewed and, on the other, could raise questions about the attractiveness of new large-scale related commercial real estate construction projects. Companies and their employees, who have adapted to telework, sometimes by constraint, may sustain it in their organizations in the long-term and question the need to keep all or part of their real estate holdings. This is why a technology giant like Facebook announced in 2020 that it would continue to promote remote work massively for its employees, even beyond the Covid-19 crisis. For example, Google announced, during the same period, that a majority of its employees would be teleworking at least until 2021.


The infrastructure segment should remain relatively resilient despite the crisis

Governments see the construction industry as key to economic recovery and a source of jobs. The on-going recovery in the sector is well illustrated in the rebound of PVC prices, a plastic material that is widely used as input for construction. Public investment should be supported by lower debt servicing costs thanks to accommodative monetary policies. For instance, this is the case in the United States, where the Federal Reserve announced in August 2020 that it would be more flexible on its inflation target, suggesting the intention to keep its key rates low in the medium-term. The ECB and the BOJ, which already had key rates of zero or even negative, are stimulating demand through unconventional measures. In addition to the EUR 120 billion envelope for additional asset purchases under the Assets Purchase Program (APP), the ECB introduced a EUR 750 billion Pandemic Emergency Purchase Programme (PEPP).  Overall, the investment projects aim to develop and improve transport and utility infrastructure, as well as the thermal renovation of buildings. An example of financing for this type of project in Asia would be the USD 68 billion project to deploy an interurban railway network in the Great Bay region (5,700km by 2035), recently approved by the Development and Reform Commission of Guangdong Province (China). China should also use public support to promote the deployment of 5G in the country.

In Europe, for example, the United Kingdom announced a recovery plan with infrastructure projects in it, including school and health infrastructures in the country up to GBP 5 billion (equivalent to USD 6.37 billion). The French stimulus plan includes EUR 4 billion (equivalent to USD 4.67 billion) for building and thermal renovation.

Eastern European countries, attractive thanks to the low cost of skilled labour, should benefit from investments in new infrastructure, particularly in connection with the potential relocation of digital activities induced by the crisis. In June 2020, Google announced its intention to invest USD 2 billion in a data center in Poland. This latest initiative is one of the examples that illustrates the fact that private investments in infrastructure by the tech giants should continue in the short- and medium-term, despite the crisis. Indeed, ICT is one of the sectors that Coface identifies as resilient to the crisis, as it benefits from collateral effects such as the increased need for products that enable people to obtain digital tools for professional, domestic and leisure purposes, in the context of the mobility crisis generated by the health crisis.


The major changes underway in the sector before the crisis, particularly those meant to answer environmental issues, should continue

For several years now, construction sector players have been engaged in a 'de-carbonized' trajectory, in order to respond to the will of consumers and public authorities to prevent environmental risks and fight climate change. For instance, the European Union (EU) has committed itself to achieve "carbon neutrality" for new constructions by 2050, as well as  reduce carbon emissions in the sector by 40% by 2030. The European Green New Deal Investment Plan provides a framework for investments in green infrastructure. This will lead to investments in low-carbon transport infrastructure (high-speed rail, public transport, electricity-recharging infrastructure). The health crisis should not change this trajectory. Moreover, with the allocation of EUR 49.1 billion (USD 57.31 billion) to the EU's "natural resources and environment" budget in 2021, the deployment of renewable energies should also benefit the construction sector. Furthermore, in 2012, the Australian government created the Australian Renewable Energy Agency (ARENA), of which the objective is to manage renewable energy projects. Since 2012, ARENA has committed to 543 projects, for a total investment of USD 1.58 billion. In Latin America, where 80% of the population is urban, the de-carbonization of buildings represents a market worth nearly USD 4 trillion by 2030, according to the World Bank.

The adoption of new technologies, such as Artificial Intelligence (AI) and robotics, is expected to accelerate following the COVID-19 crisis, due to the need to promote telework. Innovations in this area include AI-controlled robotic systems for sorting, collecting and processing demolition debris for recycling.


Last update : October 2020

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