Economic studies


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 containment measures affecting economic activity, including in the construction sector. Coface estimates a 4.3% contraction of world GDP in 2020 and forecasts a world GDP growth of 4.4% this year. 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 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. The economic recovery is now underway at global level, partly thanks to government support and accommodative monetary policies. In this context, some sub-segments of the construction sector should be more resilient than others. This is the case of infrastructure, for which projects play a key role in government stimulus packages. The majority of these stimulus packages are part of governments’ continued effort to 'decarbonize' the economy in order to address environmental challenges. Moreover, to a lesser extent, private housing is expected to gradually recover, despite still important economic uncertainties and high level of household indebtedness globally. This dynamic, with large disparities expected between regions worldwide, is likely to be supported by changes in household preferences, including rising mobility from megalopolises to less urbanized areas, following several episodes of containment measures. By contrast, the commercial real estate segment outlook worldwide is negative overall in the medium-term. The demand is expected to remain weak despite the economic recovery expected this year, since the mobility crisis triggered by the health crisis has led several enterprises in both different industries and regions of the world to sustainably modify their work organisation, with the general increase in teleworking.

Construction 1 EN
Sector Economic Insights
Private housing is expected to gradually recover from the health crisis’ knock-on effects while the commercial real estate segment is likely to remain in difficulty in the long-term

The construction industry is pro-cyclical and was hit by the global economic recession triggered by the COVID-19 crisis last year. In a context of economic uncertainty and continued high levels of global household debt worldwide, estimated by the Institute of International Finance (IIF) at USD 49.2 trillion in the third quarter (Q3) 2020, up from 47.1 trillion in Q3 2019. However, there are factors that could support household demand for private housing. Firstly, the low level of interest rates in leading economies. Secondly, the growing aspiration of part of the urban population to organise their lifestyle differently in the wake of the general and accelerated increase in teleworking after several episodes of lockdowns. An emblematic example of this trend is the dynamism of the residential segment in the U.S. In December 2020, despite a further increase in COVID-19 contaminations in the country, all indicators of residential construction activity were at new highs. Indeed, homebuilder confidence recorded historically high levels, while building permits and housing starts reached their highest level in 14 years. High demand for private housing and low interest rates have supported this sector. For its part, the outlook for non-residential property was already bleaker than the private housing activity before the COVID-19 crisis in the U.S. Coface expects this trend to continue this year. Firstly, during the first wave of lockdowns in H1 2020, many works had to be interrupted and therefore suffered serious delays, the effect of which is still being felt to a certain extent today. Secondly, even in areas where construction works were permitted during subsequent lockdown periods in the remainder of 2020, demand was low at that time due to various factors. These included uncertainties surrounding economic activity as well as a structural decline in demand due to the new organisation of businesses with the widespread use of remote work. Finally, the increase in ‘remote working’ and ‘working from home’ practices due to the mobility crisis, linked to the health crisis implies that, on the one hand, current commercial leases may not be renewed. On the other hand, in the light of these developments, the attractiveness of new long-term large-scale commercial real estate construction projects is being restored.

Indeed, companies and their employees, who have adapted to remote work, sometimes by constraint, are now in a position to sustain it in their organisation in the long-term. They may therefore question the need to keep all or part of their real estate assets.

This is one of the reasons why an ICT giant like Facebook announced in 2020 that it would continue to promote teleworking massively for its employees, even beyond the COVID-19 crisis.

The infrastructure segment should remain relatively resilient despite the health crisis’ shock

Governments see the construction industry as key to economic recovery and a source of jobs. The ongoing recovery in the sector is well illustrated in the rebound of PVC prices in leading economies. PVC is a plastic material that is widely used as input for construction (see chart). In leading advanced economies, public investment should be supported by lower debt servicing costs thanks to accommodative monetary policies. Under these favourable financing circumstances, thanks to the monetary policies pursued, several large infrastructure projects are still underway, particularly those relating to public service infrastructure, as well as the thermal renovation of buildings. Most stimulus packages implement by major economies to overcome effects of the crisis include support for infrastructure works. For instance, in the U.S., President-elect Joe Biden, campaigned, among other things, on the need to renovate the country’s infrastructure. What the U.S. government manages to achieve on this issue remains to be seen, in a context where this issue was already under discussion during the term of his predecessor, President Trump. In Europe, for example, the United Kingdom announced last year a stimulus package of infrastructure projects, including USD 6.4 billion for school and health infrastructures in the country. The French stimulus package includes EUR 4 billion for buildings and thermal renovation. Eastern European countries, which remain attractive thanks to the relatively 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 consequences of the crisis. For instance, in June 2020, Google announced its intention to invest USD 2 billion in a data centre 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. Indeed, ICT is one of the sectors that Coface identifies as resilient to the COVID-19 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 transformations underway in the sector before the crisis, particularly in response to environmental issues, should continue

For several years now, construction sector players have been engaged in a 'de-carbonized' approach, in order to respond to the willingness of consumers and public authorities to prevent environmental risks and fight climate change. For instance, the European Union (EU) has committed to achieve "carbon neutrality" for new constructions by 2050 and to reduce carbon emissions in the sector by 40% by 2030. The European Green New Deal Investment Plan provides a framework for investment 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 alter this approach. Moreover, with the allocation of EUR 49.1 billion to the EU's 2021 "natural resources and environment" budget, the deployment of renewable energies should also benefit the construction sector. Furthermore, in 2012, the Australian government created the Australian Renewable Energy Agency (ARENA), that has committed to 543 projects, for a total investment of USD 1.6 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 remote working. Innovations in this area include AI-controlled robotic systems for sorting, collecting and processing demolition debris for recycling.


Last update : February 2021

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