Construction activity this year was expected to hit a high, with nominal output slated to increase between $30 billion and $32 billion, according to estimates by the Building and Construction Authority (BCA) in early January.
However, the Covid-19 pandemic grounded all construction activity as measures were undertaken to stem the spread of coronavirus infections among migrant workers who account for a significant proportion of the sector’s workforce. In 2Q2020, the construction sector’s contribution to GDP plunged 59.3% to an all-time low. About 42,000 workers also suffered pay cuts as part of cost-cutting measures, the Ministry of Manpower (MOM) said in a report on Aug 20.
To this end, the BCA has announced measures to hasten the resumption of on-site construction work, in a bid to revive the ailing sector. Under this, some 40,000 migrant workers will be allowed to resume work without needing a BCA approval. These workers were approved as they were deemed clear of the coronavirus, are not on stay-home notices and are staying in dormitories cleared of the virus. They must also have installed the TraceTogether app.
The latest measures also see the suspension of the “10-accommodation restriction” so that more workers can head back to work, BCA noted. Previously, workers from up to 10 dormitories were allowed to work together in each construction project.
Economists have voiced their support for the resumption of construction activity, saying that the “baby steps” will help drive growth in the sector. United Overseas Bank (UOB) economist Barnabas Gan is looking at a V-shaped recovery in the sector as the latest measures should result in positive performance in 3Q2020 and 4Q2020. Nevertheless, Gan sees a full-year contraction of 14% given the decline seen in 1H2020.
Economist Song Seng Wun of CIMB Private Bank offers a different perspective. “Although workers are starting to return to work sites, there is still some way to go to return to pre-pandemic days,” he says. “Staggered work schedule to minimise new outbreaks. Demolition works started at some sites but cranes at many are still quiet,” he observes.
To Song, the bottom line is still a sharp contraction in the construction sector in 3Q2020 because of the “minimal progress payments made”. He adds that it should get “less bad” going forward, as the sector caters to pent-up demand.
What this means is that subcontractors may have to wait till the end of the year or even later to be paid. “So, it is going to be a very tough period for many in the build & construction industries,” mulls Song.
