Incessant building works may have been a campaign issue in Sliema’s local election but official figures show the construction sector’s contribution to the economy has been shrinking over the past four years.
In 2008, the construction sector was responsible for 4.8 per cent of industry’s gross value added to the economy. This dropped to four per cent last year after experiencing a constant year-on-year decline.
The GDP figures released by the National Statistics Office last week show construction contributed €219 million in value added to the economy last year, down from €245 million in 2008.
Construction passed through a good patch in the first nine months of 2011 but had a dismal performance in the last quarter that dragged down the annual GDP contribution.
On the opposite end of the spectrum, real estate activity continued to experience growth year after year, contributing €341 million in gross value added last year.
The figures come as no surprise to Michael Falzon, president of the Malta Developers Association. “This confirms what we have been saying all along that the construction industry is facing a downturn.”
In the wake of political uncertainty last month, the developers’ association and two federations representing contractors and estate agents publicly voiced concern that an already “precarious” property market could deteriorate further. They also warned of considerable job losses in the construction sector if economic uncertainty persisted.
The negative economic impact of a slowdown in the construction sector may be much higher if manufacturing sectors that depend on the industry are taken into account.
“A slowdown in construction means lower demand for concrete blocks, joinery supplies and so on but these industries are classified under manufacturing, which is a separate component of NSO statistics,” Mr Falzon said.
Asked about the contrast between a construction sector going downhill and real estate activity experiencing growth, Mr Falzon said this was a result of oversupply.
“There is a time lag between building and selling. There are a lot of units for sale from the oversupply that was built over the years, which explains why real estate has done well,” he said.
In the last three months of 2011, the economy shrunk by 0.1 per cent putting the country on the brink of a technical recession. Construction was one of a few sectors that experienced negative growth.
Economic contribution
2011: 4 per cent of gross value added
2010: 4.2 per cent
2009: 4.5 per cent
2008: 4.8 per cent
ksansone@timesofmalta.com