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Canada Infrastructure Report Q3 2010
Business Monitor International, July 2010, Pages: 82
Canada Infrastructure Report provides industry professionals and strategists, corporate analysts, infrastructure associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Canada's infrastructure industry.
BMI’s debut Canada Infrastructure Report uncovers a market which despite being developed offers substantial opportunities for growth.
Canada's construction industry appears to be over the worst of the economic downturn, which caused a 7% contraction in industry value in 2009. BMI launches its debut forecasts for the Canadian construction industry against this backdrop, forecasting consistently strong growth over the midterm period, starting with 3.55% real industry growth in 2010.
Historic real growth in Canada's construction industry indicates a dynamic market with substantial opportunities for construction companies. Indeed, compared to similar developed markets around the world, Canada's construction industry has been relatively booming. The US construction industry, an obvious comparison, has experienced a nearly eight-year decline, excluding one year of minimal growth in 2004.
Despite previous strengths, the industry was hit quite substantially by the economic downturn, with growth slowing to 2.8% in 2008 and contracting by a substantial 7.25% in 2009. Although this contraction was sharp, it is also likely to be short lived. In 2010, BMI is forecasting industry growth of 3.55%, and data for approval of non-residential building permits substantiates this optimism. The value of approvals has grown consistently over the first few months of the year (January-April), and is expected to continue, with a number of project announcements over recent months. In April 2010, it grew by 32% month on month.
The construction industry has been boosted by the government's CAD12bn (US$11.7bn) stimulus plan. Announced in January 2009, the plan set up a CAD4bn Infrastructure Stimulus Fund, providing CAD7bn (US$6.8bn) in funding for other infrastructure and social projects, including the CAD1bn (US$0.98bn) Green Infrastructure Fund. The stimulus' measures have provided a boost to the industry; however, its withdrawal will present a downside risk, especially to our forecasts from 2011. The immediate risk comes from the time span of the stimulus fund. It was set up to support infrastructure projects between 2009/10 and 2010/11, and only projects which could be completed by March 31 2011 were eligible for funding. As such, the impact of the stimulus funds will start to recede from the latter half of 2011 onwards. The major question is whether the private sector will be willing to step in and take over creating industry value from this point, and this represents a major downside risk to our optimistic forecasts. However, with Canada’s attractive business environment and project finance ratings, BMI expects strong private sector investment to be forthcoming.
In BMI’s debut Infrastructure Business Environment Ratings for Canada, we find an attractive market. Canada scores 69.3 out of 100, compiled from strong industry opportunities and limited risks. In terms of Project Finance Ratings, Canada’s strong precedent for PPPs and concessions, it is home to the most profitable toll road in the world, puts it in an enviable position and contributes to an overall score of 69.92 out of 100.
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