The 55 largest countries in the world will spend nearly $4 trillion in 13 different construction markets in 2003, says a study released this month by Global Insight Inc., an economic and financial research firm that has gauged each nation's spending history, current work, rate of economic development and likely business risks.

While that figure is a 2.8% increase over 2002, the forecast is more bullish on the future. Spending in the 55 countries will grow by 4.6% annually over the next five years, with China and India accelerating even faster. "We looked at historical estimates and the economies of each country as a whole, along with their stage of development," says Chris Holling, managing director of Waltham, Mass.-based Global Insight, formerly DRI-WEFA. Also factored into the firm's third such construction forecast are announced projects in each country, and the political and economic risks of doing business.

URBAN BOOM China is building new cities. (Photo courtesy of Parsons Brinkerhoff)

Markets tracked by the detailed study, priced at a hefty $18,000, range from housing and commercial to oil refining and infrastructure (

The U.S. dominates the global scene as the largest national construction market, which Global Insight projects to hit $903 billion this year. Expected U.S. spending growth in 2002-2003 is dismal at 1.6%, but the study predicts a turnaround in the North American market by the end of 2004.

Japan remains second in 2003 spending, but its short- and long-term growth prospects are the worst among the study's top 15 nations. "Asia, except for Japan, is poised for real strong growth over the next five years," says Holling.


But country markets with the highest potential growth rates also pose some of the highest risks, says the study. China continues to drive construction, with projected spending growth of 9.2% this year and 8.5%, on average, through 2007. "It's not just a case that they are modernizing infrastructure," Holling notes. "They are building new cities." But he cautions that China's business risk level, compared to established markets in western Europe or North America, could be a tempering factor. The SARS epidemic is a case in point.

India leads all nations in construction spending growth through 2007, with an anticipated 10.1% hike in 2004 alone, but with an equal rate of uncertainty. "It's a risk-reward situation," says Holling.

That is clearly the case in Europe, where low risk is matched by slow growth. "Western Europe looks to be weak this year, but there should be a rebound in 2004-05," says Antonia Prlic, a Global Insight senior consultant. Ireland is losing some economic steam, but she predicts the U.K. will prosper due to public infrastructure and institution investment and the nation's public-private finance initiative.

Emerging and developing economies elsewhere in Europe are worth watching, according to Global Insight. With 2004 Olympics construction on the fast track, "Greece is now performing quite well," Prlic adds. In Russia, "the pace of mortgage financing reform has been slow, but there is a growing middle class that is beginning to prosper and is demanding housing, goods and services that could stimulate construction," says Holling. Its oil and gas sector will also grow.

Despite South America's sour track record in recent years, Brazil may be emerging as one bright spot. Global Insight forecasts 8% spending growth rate over the next five years. "Brazil is reaching the point where housing demand has exceeded supply, and we project there will be a housing deficit of 5.6 million units by 2007," Holling says. But lingering political and monetary risks there may still be strong enough to throw cold water on improved spending trends.

The study focuses in on construction markets and issues on a country-by-country basis "because construction tends to be local in nature," says Holling.