BMI is cautiously optimistic that the global construction industry is set for expansion in 2025, driven by expected global monetary easing cycles and renewed private sector investment, Fitch Solutions’ research unit said in its Infrastructure Key Themes for 2025 webinar. But US President Donald Trump’s return to the White House, geopolitical risks in our part of the world, and fiscal tightening across emerging markets could push the industry in new directions. Fitch’s research team outlined five key themes shaping the year ahead.

#1- BMI expects the global construction industry to expand by 2.7% y-o-y in 2025, a slight slowdown from 3.2% in 2023 but in line with the sector’s long-term growth trajectory. While monetary easing should provide relief after years of tight financing conditions, weaker public spending — especially in emerging markets — could dampen momentum. High debt levels and fiscal consolidation efforts are likely to limit government-backed infrastructure projects, shifting the burden onto private investors. Despite these headwinds, BMI projects industry growth to remain above the past decade’s average of 2.6% y-o-y.

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Asia leads, Latin America lags: The Asia-Pacific region will continue to be the biggest growth driver, expanding at 4.2% y-o-y, while MENA and Sub-Saharan Africa will both see growth tick up to 3.8% y-o-y. The biggest underperformer? Latin America, which is expected to contract by 2.2%, weighed down by slowing public investment.

REMEMBER- Egypt’s infrastructure bill was capped at EGP 1 tn for FY 2024-25 at the IMF’s behest to rein in spending, shifting priorities toward near-complete national projects over new developments. Urban development (EGP 186 bn), oil and gas (EGP 136 bn), and ICT (EGP 85 bn) lead the agenda, while the government pushes to localize industries to save USD 3 bn in imports and increase exports by 20%.

Egyptian construction and real estate players are looking to foreign markets as domestic opportunities dry up. With public projects slowing at home, firms are turning to regional markets with strong demand and government-backed infrastructure spending. Gulf countries and post-conflict nations like Iraq and Libya are proving particularly attractive, but fierce competition, financing hurdles, and regulatory challenges remain obstacles. While Egyptian firms have the expertise and scale to compete internationally, securing funding—especially USD-denominated letters of guarantee — has emerged as a key barrier.

#2- Global monetary loosening is expected to spur private investment in construction, offering much-needed relief after four years of restricted financing, BMI projects. Interest rates are projected to fall to 3.5% in the US, 3.75% in the UK, and 2% in the eurozone, supporting infrastructure activity in 2025 and beyond. This “will lead contractors to commence new construction work, facilitate infrastructure asset owners in raising capital, and spur greater infrastructure transaction activity,” the report reads.

The immediate impact of lower interest rates will be felt in residential construction, as easier financing boosts both developers and homebuyers, BMI projects. Broader infrastructure investment will take longer to gain traction — likely after 2025 — given the lag between financing decisions and project execution. While monetary easing should stimulate construction activity, its full impact hinges on threats to economic stability and inflation risks, which could slow the pace of rate cuts.

Egypt’s sticky inflation and tight monetary policy have kept interest rates at record highs, with the overnight deposit rate standing at 27.25%. While inflation has been easing for three consecutive months, concerns over external pressures, FX stability, and geopolitical risks have kept the CBE’s unwinding of high interest rates on hold since its 600-bps hike in March 2024.

That could all change this Thursday, with some analysts expecting the CBE to begin its first rate cuts this year. A strong base effect, slowing inflation, and improving balance of payments could provide room for a 100-200 bps cut, according to our latest poll of analysts. Others argue that geopolitical instability, external debt obligations, and Suez Canal revenue risks could push the CBE’s Monetary Policy Committee to hold steady until April.

#3- Emerging market fiscal consolidation is expected to shrink public sector construction bills and incentivize governments to encourage private investment, BMI reports. With fiscal consolidation a priority, many developing economies — particularly in Sub-Saharan Africa and Latin America — are diverting funds toward debt servicing, leaving fewer resources for large-scale public projects. Sectors heavily reliant on state funding, such as transport and housing, will bear the brunt of the cuts, with private investors expected to fill the gap. Adding to the uncertainty, the future of US aid flows post-US election remains unclear, raising further risks for government-backed infrastructure.

While private infrastructure spending should ideally see an uptick in 2025, its materialization is heavily dependent on political will and institutional capacity. BMI cites Sub-Saharan Africa’s significant pipeline of public-private partnerships (PPPs), but many projects are still in pre-construction phases, requiring further efforts to unlock funding — especially amid growing competition between China and the US for regional influence. In Latin America, transport, mining-related infrastructure, and energy projects are set to drive private sector involvement, spurred by rising demand for critical minerals, energy transition investments, and nearshoring trends.

Egypt’s infrastructure sector is leaning harder on PPPs as state-backed spending slows. The government signed EGP 20 bn worth of PPP contracts this year, covering strategic warehouses, dry ports, and waste conversion projects, with another USD 3.2 bn in infrastructure projects set to be tendered under the framework before year-end. Authorities are also preparing to launch 11 new PPP projects valued at EGP 62 bn, spanning power distribution, wastewater treatment, and education infrastructure.

#4- Trump’s return signals a rollback on climate infrastructure spending: The new Trump administration is expected to scale back climate-related infrastructure investment, both domestically and internationally, BMI reports. The Inflation Reduction Act (IRA), a key driver of clean energy and EV production, faces potential funding cuts or reallocations, while broader infrastructure spending under the Infrastructure Investment and Jobs Act (IIJA) and CHIPS Act could also be reshuffled. Wind energy, EVs, and green manufacturing projects are most at risk, as Trump has signaled plans to roll back unspent IRA funds and shift priorities toward fossil fuel development.

Internationally, US-backed climate initiatives are also likely to take a backseat as the administration pivots toward traditional energy projects and deregulation. This could impact sustainable infrastructure financing in emerging markets, where Biden-era policies sought to counter China’s Belt and Road Initiative with green alternatives. Environmental regulations are also likely to be loosened, potentially fast-tracking infrastructure projects but at the cost of climate commitments.

#5- Geopolitical tensions drive interest in alternative trade routes: Interest in the India-Middle East-Europe Corridor (IMEC) is steadily growing as regional tensions continue to disrupt maritime trade in the Red Sea. This has left governments mulling alternative land-based trade routes, many of which pass through our neck of the woods.

Notably, the viability of IMEC hinges on several challenges, from infrastructure gaps to diplomatic roadblocks, BMI writes. Saudi Arabia’s rail network lacks critical mainline links, while integration with Jordan and the UAE remains limited. Political hurdles persist too, with Riyadh and Tel Aviv yet to establish any formal ties. Without progress on these fronts, IMEC’s momentum could stall, though sustained Red Sea disruptions may fast-track efforts to make the corridor a reality.

REMEMBER- Traffic through the Red Sea is slowly picking up, but the anticipated post-ceasefire rebound in Suez Canal transit has yet to fully materialize. The Liberian crude oil tanker Chrysalis made its first transit last month since being attacked in July, a move the Suez Canal Authority (SCA) called a “strong message of reassurance” for regional stability. Meanwhile, at least six US- and UK-linked ships have safely passed through since 19 January, following the Houthis’ announcement that they would only target Israel-linked vessels after the ceasefire agreement between Israel and Hamas. But this remains a trickle compared to pre-crisis traffic, with Maersk, MSC, and Mitsui OSK still steering clear, citing ongoing security risks.

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