Topic: Strategic Planning
In my last post “Status of the Jamaican Construction and Real Estate Industries to 2011”, I concluded that “if the (construction) industry growth can equal GDP growth this year (2012) and return to superior growth rates in subsequent years, the industry should regain pre-recession (2007) value-added in two years (2014)…; and, the real estate “…industry should return to pre-recession levels this year”. But, the Planning Institute of Jamaica [PIOJ] released their “Review of Economic Performance April – June 2012” on 21 August 2012 and this conclusion seems unlikely to be achieved within the specified time-frames.
The economy had 0.1% real GDP growth over the quarter relative to the equivalent period in 2011. The goods-producing industries, which includes construction, had real growth of 0.1%, while the services industries, which includes real estate, was flat. Growth rates for construction and real estate remained below GDP growth: construction at -3.2% and no growth for real estate. The GDP growth for the current quarter is projected to be between -0.5% to 0.5%. By the end of 2011, the construction industry was 13% below that of 2007, and real estate 0.5% below 2007. The present “growth” is not sufficient to achieve pre-recession levels of value-added anticipated.
On the positive side, quarterly value-added for real estate industry has consistently improved since the last quarter of 2011, all-be-it slowly. At the current rate of improvement, it is likely that this industry will return to pre-recession levels in the second quarter of 2013. The prognosis for the construction industry is however inconclusive.
Quarterly value-added for construction has consistently fallen since the third quarter of 2011 to the first quarter of 2012, with an improvement in the previous quarter. But, this gives no indication of a trend that can be expected over the current and next quarters. The down-turn has been blamed on a 69.9% reduction in expenditure on telecommunication projects and 22.3 – 69.9% reduction in various government infrastructure projects: neither of which is expected to improve in the short term. Particularly worrying is the 80.9% reduction in housing starts.
The prognosis is not bad for the real estate industry, but only time will tell what will happen with the construction industry. The government has made mention of significant private tourism projects in the pipeline. If these materialize, there may yet be hope for a return to pre-recession levels of value-added by the end of 2014. Otherwise, the Mona campus of the University of the West Indies is undertaking significant construction projects, and a number of commercial developments can be seen in the corporate area. We will just have to wait on developments within the year to determine the future state of the construction industry. One thing is however clear, improvement in the construction industry will be led by the private sector, not government; and, it is highly likely that academic and commercial developments will exceed residential, developments.