Slowdown in construction sector continues in Costa Rica

November 26, 2014

Recent data released by the Costa Rican Construction Chamber (CCC) reflect relatively slow growth from October 2013 to September 2014. The CCC report suggests that both public and private construction stagnated during the yearlong period, and previous estimates for public construction did not materialize, particularly in the area of power generation.

Download the report (in Spanish) here

Here are more of the major trends:

From October 2013 to September 2014, 5.2 million square meters were permitted for new construction, which is 592,000 fewer square meters during the equivalent prior period. Most (33.4 percent) took place in the province of San José, followed by Alajuela (23.3 percent), Heredia (13.3 percent) and Cartago (8.9 percent).

The canton of Alajuela saw the largest number of constructed square meters during 2014, as a result of the large number of new homes, commercial buildings and warehouses.

Most of the construction nationwide was in housing (56.5 percent). In this sector, single-family dwellings totaled 43.3 percent and condominiums 13.2 percent.

The commercial sector followed with 19.5 percent of the total. Hotels represented 0.7 percent of this number.

Third place went to the industrial sector, which represented 10.1 percent of the total. Office buildings came in fourth with 9.6 percent of the total.

The weakest sector was termed “other,” a category that includes parks, health clinics and educational and other public facilities. This category represented only 4.2 percent of the total.

The Economy Ministry’s “Monthly Index of Economic Activity in Construction” for 2014 also indicates that growth has been low compared to 2013. For example, the construction growth index for August 2014 was 2.3 percent, compared to 2.9 percent for the same month in 2013.

Growth in private-sector construction essentially has been stagnant. In August 2014, it grew by 4.8 percent, compared to 4.5 percent the previous year.

Public-sector construction saw a different dynamic. After the crisis of 2008, it began a turnaround in March 2012, and continued to grow every month through September 2012. However, beginning in mid-2013, public-sector construction began to slow, and by 2014 it had experienced negative growth of -3.8 percent. This suggests that public works projects intended to be build this year weren’t, especially in the power sector, according to the CCC.

Credit analyses demonstrate that financing awarded by the national banking system for construction and housing grew by 13.6 percent in 2014 over the previous year. Financing for construction increased by 14.7 percent between 2013 and 2014, and financing for housing increased by 13.5 percent.

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