IMSD: Construction Sector Expected to Grow by 4-5% in 2025
Foreks - The results of the Monthly Sector Report prepared by the Turkish Construction Materials Industry Association (Türkiye İMSAD) for October 2024 have been announced.
The report discusses the 2025 budget proposal submitted by the government to the Grand National Assembly of Turkey. It emphasizes that the primary goal of the 2025 budget is to increase revenues and reduce the deficit through public savings.
It is also noted in the budget proposal, prepared in line with the main objective, that significant resources have been allocated for investments in earthquake-affected areas and urban transformation activities. Furthermore, the 2025 budget is highlighted to be supportive of investments and the construction sector.
A budget of 584 billion TL has been allocated for disaster response in 2025. According to the report, an allocation of 584 billion TL is anticipated in the 2025 budget for the improvement of earthquake-affected areas and enhancing resilience against disasters. The amount set aside for urban transformation under the Disaster Resilient Cities Project next year is 120 billion TL, with this amount representing 0.9% of GDP. The report underscores that four areas stand out in public investments for 2025. These include addressing earthquake damages and producing social housing, swiftly completing already progressing irrigation investments, accelerating the construction of connection lines to reduce industrial logistics costs, and rapidly finishing ongoing Organized Industrial Zones (OSB) and small industrial site constructions.
A total of 1.34 trillion TL will be allocated to local governments. According to the Türkiye İMSAD report, the 2025 government budget proposal reflects the support, expenditures, and exemptions the public sector will provide in various areas. At this point, it is mentioned in the report that public fixed capital investment expenditures will amount to 1.1 trillion TL in 2025. On the other hand, it is highlighted that no new projects will start in the public sector in 2025, and ongoing investments from previous years will continue.
According to the information provided in the report, 1.34 trillion TL will be transferred to local governments from the budget in 2025. This indicates a significant increase in resources allocated to local governments, leading to a rise in their infrastructure investments in 2025.
Investments in disaster-affected areas are expected to contribute 2 percentage points to growth. As a result of evaluating the potential effects of implemented economic policies and the 2025 budget, the report anticipates that the construction sector could show a growth rate between 4-5% in 2025. It is also emphasized that infrastructure investments in earthquake-affected regions will provide a 2 percentage point contribution to the growth of the construction sector. Additionally, urban transformation activities are expected to contribute 1.5-2.0 percentage points. The contribution of other limited public investments is projected to be 0.5 percentage points. Particularly, private sector activities, expected to gain momentum in the second half of the year, are predicted to contribute 0.5-1.0 percentage points to the construction sector.
The production of the construction materials industry decreased by 2.7%. According to the report, the production of the construction materials industry contracted by 2.7% in August of this year compared to August 2023. In the first quarter of the year, production increased by 10.9% compared to the first quarter of the previous year. However, in the second quarter, it dropped by 3.9%. The decline in production continued in the third quarter, with another decrease occurring in August after July.
In August 2024, the report indicated that many sub-sectors recorded a decline in production. From January to August 2024, production increased in 8 sub-sectors compared to the same period last year, while it decreased in 14 sub-sectors.
According to the report, some sub-sectors experienced significant production increases. In the first eight months, production of construction glass rose by 15.5%, and production of iron and steel construction products increased by 14.1%. Ready-mixed concrete production grew by 13.1%, and cement production rose by 8.3%, while production of iron and steel bars and profiles increased by 7.8%.
On the other hand, in the first eight months of 2024, there were also significant decreases in production in some sub-sectors. The substantial decline in ceramic products continued into the new year as well. In the first eight months, the production of ceramic tiles decreased by 23.5%, and production of ceramic sanitary ware fell by 26.4%. Production of metal structures and building components dropped by 21.6%, the production of iron and steel radiators declined by 23.6%, and production of combined flooring and floor coverings decreased by 18.9%.
The report notes that different production trends emerged in sub-sectors in 2023, with a similar trend continuing in the first eight months of 2024.