Construction sector still not out of the woods yet

PETALING JAYA: The construction industry has recorded an estimated loss of RM42 billion now since the start of the movement control order (MCO) in March 2020 due to the impact of the Covid-19 pandemic, according to Senior Works Minister Datuk Seri Fadillah Yusof.

He said growth in the construction industry had declined by 19.4% in 2020 and 10.4% in the first quarter of 2021.

“However, with the various measures and SOP to ensure safety and to curb the spread of Covid-19 at construction sites, the growth rate of the sector has increased 40.3% during the second quarter this year,“ Fadillah said in his keynote address of the Malaysia Rating Corp Bhd (MARC) MARC360: Sustainable Infra 2021 Virtual Conference yesterday.

He added that the National Construction Policy 2030 (NCP 2030) to digitalise the construction sector launched on Nov 9 will see the construction sector embracing the vision of the nine pillars of the IR 4.0 including promoting sustainable construction.

“The elements are specifically deliberated in the thrust two of NCP 2030 to embrace a sustainable built environment,“ he said.

Meanwhile, MARC chief economist Firdaos Rosli said the gross issuance of Malaysian Government Securities (MGS) and Government Investment Issues (GII) in 2022 is projected to be around RM160 billion to RM170 billion on the primary market forecast in 2022.

“It is slightly lower than our projected figure in 2021. This is based on the expected increase in government revenue and expected economic growth for 2022. Meanwhile, the gross issuance of corporate bonds in 2022 is expected to grow slightly amid expectations for monetary policy normalisation. Bond issuers would face increasing costs to seek financing,“ said Firdaos during the MARC’s Economic Report and Capital Market Update 2021.

On the primary market of government bonds 2021, he said, the total outstanding on MGS and GII grew at a heightened pace in 2020 by RM78.1 billion to RM811 billion compared to the average annual accumulation of RM4 billion from 2017 to 2019 amid the heavy new supplies to fund stimulus packages and others.

“The YTD outstanding MGS and GII are expanded by RM28.5 billion to RM839.5 billion. The heavy reliance on debt to push the aggregate demand during an economic crisis is normal at every crisis.

“Meanwhile, the gross issuance of corporate bonds continues to grow steadily even at the time of crisis, corporate bonds did not suffer a considerable decline. Buoyed by easy monetary policies and optimism of economic reopening. The gross issuance 2021 YTD were mainly supported by heavy new supply from quasi-government and rated corporate bond issuers.”