Boston, MA -- (SBWIRE) -- 01/06/2014 -- The Venezuelan construction industry increased in value at a CAGR of 21.68% during the review period. However, in real terms, the CAGR increased only by 2.34% as a result of high inflation in the Venezuelan economy. Growth in the industry was driven by a large-scale housing program undertaken by the government, infrastructure projects in railways and energy, and continuation of social spending initiatives. The industry is anticipated to post a CAGR of 15.84% over the forecast period. However, excessive government intervention and nationalization of key sectors are issues that need to be addressed to enhance investor sentiment. Moreover, owing to high inflation in the country, the industry's output growth rate is expected to remain in the range of 15% to 17% over the forecast period. However, the real outlook, without inflation, is bleak due to sluggish external demand for oil, the country's main export commodity. Moreover, the US, the main import partner for oil from the country, has been diversifying its import base and importing lesser volume from Venezuela due to decline in production.

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Key Highlights

- According to Central Bank of Venezuela (BCV) figures, the country has registered steep rise in inflation rates in recent years. The consumer price index in the country increased by 49.4% in September 2013 compared with the same period in 2012. With high inflation, a deteriorating business environment and depreciating domestic currency against the US dollar, the real growth rate of the construction industry's output is expected to remain weak over the forecast period.

- Growth in the construction industry slowed to 9.1% in 2012, after registering above 14% growth during 2008-2011 as the industry experienced the pressure of material shortages and power shutdowns along with a decline in growth of public funding as export revenues from oil, which is a main source of finance to these projects, grew by just 4% in 2012, compared to 35% in 2011. The trend has continued, and the construction industry's real growth rate for the first two quarters of 2013 of was -3.4%. The contraction was caused by a decline in government spending on its mass housing construction program.

- Construction value added in nominal terms registered a CAGR of 21.49% during the review period to reach VEF131.1 billion (US$30.5 billion) in 2012. Over the forecast period, the growth in construction value added is likely to be lower, at a CAGR of 16.90%, as contractors experience a challenging period with supply constraints and legal and bureaucratic bottlenecks likely to delay execution of projects.

Companies Mentioned in this Report: Vepica CA, Inelectra SA CA, Tecnoconsult, SA, The Y&V Group, Constructora Norberto Odebrecht de Venezuela CA

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