Transport Infrastructure Underpins 2014 Growth Forecast
BMI View: Our estimates for a contraction in France's construction sector in 2013 have been reinforced by official data reporting negative growth of 2.7% in the first nine months of the year. The industry has been contracting consecutively since 2008 and we believe that the recession has continued in 2013 as a result of week macroeconomic recovery. Our Country Risk team estimates 0% GDP growth for 2013 and a slight recovery at 0.5% real growth in 2014. On that basis, we are also more optimistic towards 2014 when we expect the construction industry to return to low but positive growth at 0.5% in real terms supported by the development of transport infrastructure projects.
Seeing The Light In 2014?
We see some scope for a slight improvement in gross fixed capital formation (GFCF) in 2014 - a good proxy for construction and infrastructure - as household and business economic sentiment begins to pick up. However, major investments are likely to be capped by two factors. Fixed capital formation by large corporates is likely to be restrained by the uncertain business environment generated by the current administrations increasing hostile policy stance towards businesses. Such moves reduce the attractiveness of France as investment destination and may also impede the completion of planned infrastructure projects.
|Six Years Of Consecutive Recession|
|Construction Industry Value (EURbn) & Real Growth (% y-o-y), 2007-2017f|