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Construction investment tipped to dip 3 pct this year on coronavirus

All News 10:03 April 20, 2020

SEOUL, April 20 (Yonhap) -- South Korea's construction investment is expected to shrink 3 percent this year due to increased uncertainty stemming from the coronavirus outbreak, a think tank said Monday.

The forecast by the Korea Research Institute for Construction Policy compares with the think tank's earlier projection of a 1.8 percent on-year contraction.

The institute said the private sector is likely to sharply scale down their investments due to the COVID-19 crisis, despite increased state expenditures to minimize its impact on the economy.

The think tank also said the coronavirus pandemic could make a big dent in the amount of overseas orders won by South Korean construction companies this year.

Construction investment tipped to dip 3 pct this year on coronavirus - 1

Combined overseas orders by local builders are forecast to reach US$22 billion this year, down 21.4 percent from its earlier estimate of $28 billion.

"The coronavirus outbreak is feared to lead to delayed or canceled overseas construction orders," a researcher at the institute said. "Making matters worse, the recent plunge in oil prices has made the Mideast construction market more volatile."

The Middle East is one of the South Korean builders' major overseas markets.

Total overseas construction orders clinched by local builders, which came to nearly $10 billion in the first two months of the year, are likely to start contracting considerably in the second quarter, he added.

The think tank further said the coronavirus outbreak could raise the financial risk of South Korean builders due to delays in construction projects and greater costs.

The number of marginal construction firms, or those unable to service their debts with earnings, could reach up to 7,000 this year, or about 14 percent of the country's total builders estimated at 50,000, it added.

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