GCC’s construction sector to boom despite oil price drop

The value of planned construction projects or those that are underway in the GCC is estimated to reach $172 billion in 2015, according to a new report released by audit firm Deloitte.

The figure is also the highest on record till date as the Gulf countries continue to spend in infrastructure projects, the report said.

“The forecast of $172 billion worth of projects are against a backdrop of lower oil prices, continuing political unrest and reduced International Monetary Fund (IMF) growth forecasts across the GCC,” said Cynthia Corby, audit partner and leader of the construction industry for the Middle East.

“However the GCC countries have the benefit of reserves, which they have built up as a buffer and which they can continue to use to achieve their outlined strategies.

“Therefore, they are expected to continue to spend on infrastructure and capital projects in order to achieve their strategies for diversification of their economies.” she said.

Valued at $32 billion, the Al Maktoum International Airport expansion is the biggest infrastructure project in the UAE, followed by the $20 billion industrial project Tacaamol – Al-Gharbia Chemicals Industrial City in Abu Dhabi.

The UAE is also expected to spend about $24 billion on building mixed-use developments during 2015.

Meanwhile Saudi Arabia’s biggest construction projects are the $15 billion mixed-use development Al Mozaini – Riyadh East Sub Center and the $13.3 billion Khozam Development in Jeddah.

A number of construction projects in healthcare, power and infrastructure are also expected to buoy the Kingdom’s construction sector in 2015, the report added.

Qatar too is expected to spend about $15 billion on its passenger and freight rail this year, Deloitte said.

Almost 40 per cent of the projects that are currently in execution or pre-execution phases in the GCC are related to residential, leisure and hospitality buildings.

“These projects are the most sensitive in terms of balancing supply and demand in each of the GCC countries, with timing of delivery balanced alongside a sensible return on investment likely impacting the awards of these projects specifically,” the report said.

“GCC countries are hence expected to manage their economic growth and planned capital projects to create diversified economies with effective debt and capital funding in the coming years.

The construction sector plays a major economic role in some Gulf countries such as the UAE. Meanwhile the industry is also expected to become more relevant as the region gears up to host mega events such as Expo 2020 and FIFA 2022.

According to a study by Ventures ME, construction projects with a combined value of $67.6 billion were completed in 2014 in the GCC.