BMI View: We currently forecast 2.6% real growth in Israel's construction industry in 2015, following an estimated contraction of 0.4% in 2014. Our forecast is supported by low base effects and a recovery in gross fixed capital formation. We maintain our medium-to-long term favourable view of Israel's construction market and we forecast an average growth rate of 2.3% between 2016 and 2024.
Key developments in Israel's infrastructure sector:
Our Country Risk team expects growth in gross fixed capital formation (GFCF) to accelerate by 3.1% in 2015 as result of low base effects following a sharp decline in 2014, estimated at -1.5%. In terms of GDP real growth, our Country Risk team forecasts a more solid 3.1% in 2015, from 1.6% in 2014.
Israel's infrastructure project pipeline is relatively well diversified. We identify strong potential in the transport infrastructure sector, particularly airports and railways.
We are also seeing significant developments in the renewables segment of the energy sector. This became evident as Megalim Solar Power Limited achieved financial closure for the USD1.1bn construction contract of a solar thermal power plant in June 2014. The plant forms part of the 270MW Ashalim project, which consists of two CSP parks and one photovoltaic facility in Ashalim, in the Negev Desert.
In addition, the discoveries of significant reserves of natural gas in offshore Israel will enable the country to achieve a high degree of energy independence. We expect a large amount of construction of natural gas-fired power plants in the coming years as production of natural gas is ramped up. Israel's Tamar field has 254 billion cubic metres (bcm) in reserves slated for domestic consumption.
We are less optimistic about the residential building sector as it faces numerous obstacles, namely limited and state-controlled land supply, and excessive red tape and bureaucracy. Government efforts to address Israel's housing shortages have been largely insufficient and we see little scope for this to improve.
A downside risk to our forecast is Israel's failure to make progress in peace talks with the Palestinians which will leave the country ever more internationally isolated over the coming years, deterring private investment which is much-needed in the infrastructure sector.
|f = BMI forecast. Source: Central Bank of Israel, Central Bureau of Statistics, BMI|
|Construction Industry Value, Real Growth, % y-o-y||-3.31||1.86||2.77||3.77||4.78||5.74||4.76|
|Construction Industry Value, % of GDP||4.3||4.2||4.2||4.2||4.2||4.3||4.2|
|Construction industry value, ILSbn||47.82||49.07||51.41||54.71||58.91||64.06||69.03|
|Geography||Risk/Reward Index||Rewards||Industry Rewards||Country Rewards||Risks||Industry Risks||Country Risks|
The Israel Infrastructure Report features BMI Research's market assessment and forecasts covering public procurement and spending on all major infrastructure and construction projects, including transportation and logistics by land, sea and air; power plants and utilities, and commercial construction and property development. The report analyses the impact of regulatory changes and the macroeconomic outlook and features competitive intelligence on contractors and suppliers.
BMI's Israel Infrastructure Report provides industry professionals and strategists, sector analysts, investors, trade associations and regulatory bodies with independent forecasts and competitive intelligence on the Israeli infrastructure and construction industry.
- Benchmark BMI's independent infrastructure industry forecasts for Israel to test other views - a key input for successful budgetary and planning in the Israeli infrastructure market.
- Target business opportunities and risks in the Israeli infrastructure sector through our reviews of latest industry trends, regulatory changes and major deals, projects and investments in Israel.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. SWOTs, KPIs and latest activity).
BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis covering infrastructure and construction, regulatory changes, major investments and projects and significant national and multinational company developments. These are broken down into construction (social, commercial and residential), transport (roads, railways, ports, airports, etc), and energy & utilities (powerplants, pipelines and so on).
Industry SWOT Analysis
Analysis of the major strengths, weaknesses, opportunities and threats within the infrastructure and construction sectors and within the broader political, economic and business environment.
BMI Industry Forecasts
Historic data series (up to 2012) and forecasts to end-2024 for all key industry indicators, supported by explicit assumptions, plus analysis of key developments in the market and risks to the main forecasts. Indicators include:
Construction: Industry value (USDbn); contribution to GDP (%); total capital investment (USDbn); real growth (%).
Construction industry real growth forecasts (%) and industry value (USDbn) forecasts for industry sectors are split into Residential and Non-residential and Infrastructure sectors. Where the data is available for particular countries the infrastructure is further broken down into indicators for the transport subsectors of roads, railways, airports and ports and the energy and utilities sub-sectors of power plants and transmission grids, oil & gas pipelines and water infrastructure. This dataset is unique to the market.
The reports also include analysis of latest projects across the infrastructure sectors (transport, utilities, commercial construction).
BMI’s Infrastructure Risk Reward Index
BMI’s Risk Reward Index provides investors (construction companies, suppliers and partners) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points. These provide indices of highest to lowest appeal to investors, with each position explained.
An assessment of the competitive landscape and key challenges to entering the market. Details of the largest companies active in the sector across the sub-segments of the industry, including the key financial figures from some of the largest players in the sector.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape to generate company SWOT analyses. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
The Infrastructure reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.