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Gross Fixed Capital Formation 4th Quarter 2023

The annual decline in Gross fixed investment (GFCF) accelerated in the 4th quarter of 2023, from a 2.9 percent y-y contraction in real terms in Q3 to -4.7 percent y-y.   The rate of decline accelerated in the residential market, down 9 percent in the 4th quarter (with an overall 2 percent decline for 2023), with an accelerated decline also noted in civil construction, down 3.4 percent y-y in the current quarter. Investment in the non-residential sector rose 2.1 percent following a 0.1 percent increase in the previous quarter.  Overall it was a bleak second half of 2023, but stronger performance in key indicators, such as tender values, infrastructure allocations for the 2023/24 financial period, improved civil contractor confidence, should still offer some support in the first six months of 2024, albeit moderately.  Tender values were weaker in the civil sector in the last quarter of 2023, but contractors were not as negative as in previous quarters, while consulting engineers were also more optimistic regarding working conditions in 2023.  As the impact and pace of renewable energy project implementation may have slowed somewhat from the peak of the crisis, it could also have impacted on GFCF in construction that includes the cost of machinery and equipment related to renewable energy development.   The building industry is expected to remain under pressure, and the decline in the residential market is expected.  Investment growth by the private sector (for total investment) slowed to 3.9 percent in the 4th quarter, with the decline in SOE's investment having accelerated to 5.5 percent y-y. General Government's pace of investment also slowed, reaching an increase of just 0.4 percent y-y.  With just a moderate overall 2 percent increase in total fixed investment, and no change in GDP, the contribution of GFC to GDP remained below 15 percent at 14.9 percent, with investment in construction slowing to a mere 5.2 percent from over 8 percent in 2010. Mining, electricity and gas were the strongest sectors in the 4th Quarter, with mining up 2.4 percent q-q, and electricity up 2.3 percent. Economic growth was pulled lower by agriculture (-9.7%), Construction (value add, -1.4%), trade and transport (-2.9%) and general government services (down 0.6%).

 

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