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Canada Infrastructure Report Q4 2010
Business Monitor International, Oct 2010, Pages: 70
The 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.
Canada’s construction industry has historically outperformed its southern neighbour the US in growth terms, a trend we expect to see continue over the medium term (2010-2014). Despite a sharp contract in industry value growth in 2009, we forecast a return to growth in 2010, (3.6% y-o-y). Construction growth will continue to recover over the medium term with 5% on average growth expected per year between 2011 and 2014.
Key growth drivers over our forecast period will be:
- Monthly y-o-y growth rates for the construction industry corroborate our view of a rebound in 2010, with growth averaging 5% in the first six months of the year. However, with a slowdown expected in the US over the second half of 2010 and the potential for this to impact Canada quite strong, we are forecasting growth to slow from first half highs over the second half, to average at 3.6% for the year. Growth so far has been driven by residential building construction and, to a lesser extent, by civil engineering, non-residential building (eg commercial and industrial construction) has on the other hand continued to contract over the year.
- 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.
- Canada has a very attractive market for public private partnerships, and this should help the country attract private investment into its infrastructure sector. In BMI’s Project Finance Ratings Canada scores 67.5 out of 100. The country is at the forefront of social infrastructure concessions, which is helping the country attract private capital at a time when private investors continue to be wary of investment. The one risk is the failure of SNC Lavalin to secure project finance for the Toronto Airport rail link in July 2010, which led to the concession being cancelled. This could impact perceptions of Canada’s project finance risks and therefore threaten future interest in projects.
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