Boston, MA -- (ReleaseWire) -- 03/04/2014 -- The South Korean construction sector continued to recover strongly in Q313, due primarily to a surge in activity in the residential building sector. However, we still believe that growth will decelerate over 2014 - with our construction real growth forecast at just 1.1% for 2014. This is primarily because of our downbeat outlook towards all of South Korea's construction sector drivers - namely, weak macro fundamentals for residential buildings, a poor export outlook for non-residential buildings and declining government spending on infrastructure.
Some notable factors that affected infrastructure development in Q313 were:
- The residential building sector was once again the main engine of growth, with real expansion for the residential sector reaching 18.2% y-o-y in Q313, close to the decade-high quarterly growth of 19.0% y-oy, seen in Q213. The infrastructure sector also grew significantly, though not as notably as the residential sector. Real growth in the infrastructure sector reached 3.8% year-on-year (y-o-y) in Q313, the highest growth rate since Q409.
- In the non-residential building sector, a lack of demand for South Korea's manufacturing products (a key driver of non-residential building investment) held back activity within the sector and we expect this trend to continue into the near future. Given our less-than-optimistic expectations towards the country's economic climate in the coming year, we believe companies are likely to maintain a cautious outlook towards fixed investment.
- construction of an 800MW combined cycle gas-based power plant in Seoul. The ground facilities, which are currently in operation, would be converted into a cultural complex, involving sports facilities, a library, a museum and a performance centre. POSCO E&C consortium will be responsible for the construction of the KRW1.02trn plant. Additionally, the project will be designed by KEPCO E&C, while the main equipments will be supplied by Doosan Heavy Industries. The plant is scheduled to commence operations by September 2016.
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