GCC Construction Sector Declines, 2018 is the worst
According to the report by MEED, project activity in the GCC has declined over the past four years, as government spending has been cut.
Still, the stabilization of oil prices and the launching of large new projects can be reasons for optimism in the coming period.
After two decades of expansion, the GCC construction industry is witnessing a changing. As construction awards fell last year to their worst year since 2012. In 2018, construction and transport contracts awarded recorded $ 63.4 billion, down by 8.4% from 2017.
As oil prices have fallen since 2014, capital spending has fallen, so construction activity in the Gulf has declined over four years, and by the beginning of 2019, the sector showed some signs of recovery.
Although recovery was expected this year, this was not achieved during the first half of the year, which saw grants of $ 22.4 billion for both construction and transportation projects.
The year 2020 is expected to see a rebound in the construction sector, with increase in the government spending on infrastructure and the supporting real estate investment, in light of the positive economic expectations resulting from high oil prices since mid-2017 as a result of the agreement between OPEC and non-OPEC oil producers to set a ceiling on oil production.
Cash flow declines
Some factors have led to a decline in contractors’ cash flow over the past four years, including a reduction in bid prices due to a lack of new project opportunities, as well as the tightening of financial governments that delayed contract payments. These factors made some companies reducing their operations, also some foreign investors were forced to leave the region.
During this period Dubai was the main driver of construction activity in the Gulf, despite the slowdown in the first six months of this year, it remained the top performer in the construction market as it received bids with an amount of $ 10.9 billion in the first half of the year.
currently, the focus is on Saudi Arabia, which has huge infrastructure development plans. However, spending on construction and transport projects in the GCC is expected to fall again this year.
It is worth mentioning that there are many planned mega projects in the GCC. As from 30 June 2019, the value of planned projects that is under construction reached $ 1.2 trillion.
By numbers, find out the GCC projects
Since the middle of this year, construction and transport projects have reached $ 578 billion, along with $ 597 billion planned projects. Of these, about $ 123 billion of projects are at some stage of the tendering or procurement, and an estimated $ 235 billion of construction projects under design, in addition to another $ 239 billion of projects under study.
