Indonesia’s construction industry to expand by 7.2%: GlobalData

The construction industry in Indonesia is projected to record a growth of 7.2% in real terms in 2022, surpassing the pre-pandemic output levels, according to data and analytics company GlobalData. This would be a notable increase compared to the growth rate of 3.1% recorded in 2021, when large-scale social restrictions and pandemic-related uncertainty deterred new construction investment which consequently impacted construction progress.

GlobalData’s report, ’Indonesia Construction Market Size, Trends and Forecasts by Sector – Commercial, Industrial, Infrastructure, Energy and Utilities, Institutional and Residential Market Analysis, 2022-2026’, reveals that following the recovery in 2022, Indonesia’s construction industry is expected to record an annual average growth of 5.8% in real terms over the remainder of the forecast period, between 2023 and 2026.

Growth over the forecast period is anticipated to be driven by the Indonesian government’s commitment to invest US$ 430 billion on public infrastructure development by 2024 and works on the 2021– 2030 Electricity Supply Business Plan (RUPTL).

“The government is expected to continue its substantial planned infrastructure investment, to offset the economic impact of the current wave of the Omicron variant and an expected normalisation of monetary policy by Bank Indonesia,” explained Willis Rooney, economist at GlobalData.

"In December 2021, the government allocated US$27.1 billion for infrastructure development in its 2022 state budget, which is expected to support the delivery of six new airports, 6,624 km of railway and 205 km of new road. Construction growth will be further supported by the Indonesian Ministry of Public Works’ plan to expand its 2,000 km toll road network to 5,000 km by 2024.”

Having been disrupted during much of the first three quarters of 2021, due to the impact of large-scale social restrictions, there has been a noticeable improvement in construction activity.

Mr Rooney concluded, “In Indonesia, GlobalData’s Construction Project Momentum Index (CPMI) accelerated in the final quarter of 2021, rising to 0.49 in Q4 following a CPMI score of 0.3 in Q3 2021. The CPMI is an assessment of the health of the construction project pipeline at all stages of development, from announcement through to completion.

“Project momentum has been relatively subdued during the pandemic, though picked up rapidly in December 2021 and January 2022, following an easing of restrictions. Indonesia recorded the second-highest CPMI score in Southeast Asia in January 2022.”

Image: Afif Kusuma/Unsplash