Saudi Arabia’s construction industry expected to be buoyed by investments in the tourism industry
Leading international construction consultancy, Linesight, has released its latest Middle East construction industry findings, underpinning the impact of Covid-19 on the sector in the UAE, Saudi Arabia, Bahrain, and Kuwait.
As part of the company’s Knowledge Centre, the findings highlighted ongoing economic volatility however, the construction industry across the region is expected to be buoyed by a range of government stimulus packages. As a result, modest growth within the industry is expected to be realized in 2021, with recovery already being witnessed in some countries.
“According to GlobalData, the UAE construction sector recorded growth of 3.3 percent in 2019. Pre-Covid, this figure was expected to increase to 4.3 percent in 2020, predominantly driven by a range of government initiatives. With the onset of the virus and the subsequent drop in oil prices, output is expected to contract to 1.9 percent this year, before recovering to 3.8 percent in 2021,” commented Ciaran McCormack, Regional Director, Linesight Middle East.
Kingdom boost
In Saudi Arabia, spending on infrastructure alone in the next 20 years is expected to top US$ 1.1tn. Several multi-billion-dollar infrastructure projects relating to Saudi Vision 2030 and the country’s drive to become a tourism hub, have lifted the construction industry.
These projects include the US$ 500bn NEOM project, US$ 20bn Diriyah Gate Development, US$ 10bn Red Sea Development, and the US$ 5bn Qiddiya Entertainment project.
“As a result of the IPO of Saudi Aramco and the Public Investment Fund (PIF), we expect to see sustained investment in the construction industry, a result of a significant number of projects alongside the ongoing megaprojects, which will keep the industry buoyant,” added McCormack.
Elsewhere in the GCC, the construction industry is expected to witness a sharp contraction. According to Linesight, the annual GDP from construction in Bahrain fell slightly from US$ 631mn in Q4-2019 to US$ 624mn in Q1-2020. This is likely to be exasperated by increased preliminary costs as a result of setting up sites to meet Covid-19 restrictions, placing further burden on the Bahraini construction industry.
Stimulus for Bahrain
The Government of Bahrain has however introduced a range of measures, including a US$11.4 billion stimulus package, will help offset some of the detrimental impacts of the virus.
In Kuwait, a survey by Bensirri PR revealed that 45 percent of business owners suspended their activities, with another 26 percent potentially declaring bankruptcy as a result of Covid-19 and low oil prices.
The construction industry in the country is expected to witness an uptick, in line with the country’s Vision 2035 as envisaged by HRH Mohammed Bin Salman Al Saud, the Crown Prince of Saudi Arabia. A range of transport and healthcare related infrastructure, commercial buildings, industry facilities, water distillation facilities and renewable energy projects should bolster the construction industry.
“The pandemic-related restrictions have served as a catalyst for further advancements in the technology sector. The data centre market in the GCC, in particular, has remained relatively resilient as the shift towards virtual working platforms and online shopping is compounded by longer-term trends, such as investments in 5G technology,” he concluded.
