Impact of inflation rate on construction projects budget: A review

Owing to its significant contribution to GDP and other sectors, the construction industry plays an important role in economic growth. The economy of countries depends on a number of variables in which inflation is one of them. The position of inflation in economic growth cannot be overlooked, as it is retaliating either positively or negatively. This paper explores the role of inflation and how it affects the economy and the construction industry. It is concluded that the inflation rate is neglected in most of the construction projects economics and budgeting that causes the project cost overrun as the building materials prices, labour wages, and machinery hire rates are changing annually. Moreover, a framework has been proposed that highlights the strong relationship between the inflation rate and the construction industry. The framework is useful for the future budget estimation model to eliminate project cost overrun which occurs due to the inflation rate. (C) 2020 The Authors. Published by Elsevier B.V. on behalf of Faculty of Engineering, Ain Shams University. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).

Automated summary

The study examines the impact of inflation on the economy and construction industry, revealing that inflation rate is often overlooked in construction project economics and budgeting, leading to cost overruns. A framework is proposed to highlight the strong relationship between inflation rate and the construction industry for future budget estimation models.