MIDF Research foresees construction sector to continue growth in 4Q

KUALA LUMPUR: The Malaysian construction sector is expected to continue registering strong growth in the fourth quarter of 2023 (Q4CY23), underpinned by the government's expansionary fiscal spending and further progress in private and public sector projects, said MIDF Research.

In its Economic Brief today, the research house reiterated its forecast for the sector to expand stronger at 7.5 per cent in 2023 (2022: 5.0 per cent) on the back of better supply conditions.

It said growth in the sector, measured by construction work done, accelerated to 9.6 per cent year-on-year (y-o-y), the fastest expansion in three quarters.

In October 2023, civil engineering works, which comprised 40.5 per cent of the total construction output, recorded stronger growth of 17.1 per cent y-o-y.

Moreover, construction work done in the residential sector and special trade activities both grew faster at 7.9 per cent y-o-y and 16.2 per cent y-o-y, respectively.

"The growth was partly weighed down by the -0.7 per cent y-o-y contraction in non-residential construction, the first decline in seven quarters.

"At the same time, public corporation recorded a strong rebound in total work done, surging to 25.6 per cent y-o-y, mainly due to completion of civil engineering works which contributed more than two-thirds of the overall construction output growth during the month," MIDF Research said.

Output by the private sector also recorded positive growth, albeit at a more moderate pace of 8.6 per cent y-o-y compared to 17.3 per cent y-o-y in 2Q 2023, due to softer expansion in residential construction and civil engineering works.

On the other hand, the amount of construction work done for government-owned projects declined -0.8 per cent y-o-y, marking the first y-o-y drop after five quarters of growth.

The weaker growth was due to the higher base effect as the level of output in government projects actually rebounded to 6.4 per cent month-on-month (m-o-m) in October, reversing from the -7.6 per cent m-o-m decline in the previous month.

"Together with the 28 per cent m-o-m surge in works done by the public corporations, the public sector output largely contributed to the stronger 3.4 per cent quarter-on-quarter (q-o-q) rise from 0.4 per cent q-o-q growth in 2Q 2023, which more than offset the -4.2 per cent q-o-q decline in private sector output," it added.

According to the Malaysian Statistics Department, the value of work done in Malaysia's construction sector rose by 9.6 per cent y-o-y to RM33.4 billion in 3Q 2023, continuing its positive pace for the sixth consecutive quarter. - Bernama