Agility for Growth

The new reality of low oil prices has caused a nervous economic environment across the MENA oil exporting countries. Indeed, the introduction of economic reforms by policy makers coupled with cuts in public spending will certainly impact the region’s economic and geopolitical outlook. Although great fiscal pressure has been impended on Gulf countries, Saudi Arabia, the United Arab Emirates (UAE), Kuwait and Qatar benefit from more solid financial reserves together with the progress made in diversification and integration with world trade, all of which has allowed them to confirm their visions for diversification as a priority. The Middle East and Africa (MEA) region’s construction industry will grow by 6.9 percent annually in 2016-2020, according to Timetric’s Construction Intelligence Center (CIC). The predicted rate of growth is expected to be driven largely by regional investment in major infrastructure initiatives.

GCC Projects Market Outlook

The pipeline of projects planned in the Gulf Cooperation Council (GCC) as of May 2016 amounts to USD2 trillion, according to Deloitte, with Saudi Arabia and the UAE as the market leaders, and with construction and transport being the two leading sectors with shares of 52 percent and 19 percent, respectively. In third place is power with 11 percent. Moreover, awards in 2015 across the GCC amounted to USD165 billion, a good year taking into account historical trends. On a country level, Saudi Arabia and the UAE did not perform as expected, whereas Qatar and Kuwait exceeded historical awards. In Qatar this was due to investments in infrastructure and the World Cup preparation, and in Kuwait primarily due to large oil and gas investments. The forecast of contract awards in the UAE is set to be stable and mainly driven by the robust construction market in Dubai. Oman is expected to remain stable with values around USD13 billion.

Sizeable Projects Drive Growth

The government’s push to stimulate the economy after a turbulent post-revolutionary period is good news for Egypt’s construction sector. According to Oxford Business Group, dozens of planned mega-projects and public works initiatives mean that the contracting industry is facing a sizeable project pipeline across all segments of the market. By the same token, the Algerian construction industry will continue to expand in real terms over the forecast period (2016–2020), with investments in infrastructure construction, healthcare, the manufacturing industry, education facilities and housing projects.

Real Estate to Set the Balance

The Lebanese real estate market remained, even in the darkest times, one of the backbones of the Lebanese economy, according to a recent BLOMINVEST Bank report. Although 2015 sent the real estate sector to the red zone, recent figures reveal that Lebanon’s real estate market entered a recovery phase during 2016. Real estate activity showed an improvement during the first half of the year with the number of transactions adding 4.4 percent year-on-year (y-o-y) to 39,100, according to data provided by the Lebanese Cadastre Registry. Similarly, Bahrain’s real estate market remained buoyant despite the recent oil slump. The government started to undertake remedial and preventative actions to end the dossier of stalled real estate projects, according to a report released by The Big 5. The country announced the creation of best conditions for the construction and real estate sectors.

The Right Ingredients to Progress

Indeed, construction is one of the economy’s most important areas. After a slowdown in 2014, Morocco’s construction industry saw a return to growth in the last couple of years and continues to be driven by strong demand for housing, public spending on infrastructure and investor incentives from the Ministry of Housing and Urban Policy. Benefiting from strong ties to both Europe and the Arab world, Morocco has the right ingredients for future growth: low inflation, political stability, an industrial base and a favorable climate. In like manner, Construction Global has reported that the Turkish industry is looking at an optimistic growth rate of 4.5 percent. This growth is based on purely domestic demand and does not include overseas projects or exports. Last of all, unlike many economies elsewhere on the continent, Oxford Business Group reveals that Tunisia’s construction market is dominated by local firms, which are also becoming increasingly active abroad, not only in nearby countries like neighboring Algeria, but also in parts of West Africa.

ACW Content & Research Team