GCC construction projects set to slow down in 2016

Construction companies in the GCC region should prepare for a sharp contraction next year as lower oil prices continue to take their toll on the market, Ed James, director of content and analysis at Middle East Economic Digest (MEED) Projects warned.

“I am increasingly concerned about activity next year, particularly in the region’s two biggest markets, Saudi Arabia and the UAE,” he said on Tuesday during MEED’s Qatar Transport Forum 2015. “There is potential for a very sharp fall in 2016 and 2017.”

MEED Projects had forecast $49 billion of awards in the kingdom this year; however, only $33 billion has been awarded thus far.

Meanwhile, the UAE has awarded about $25 billion in project contracts, which means it still has a way to go achieve its 2015 forecast of $43 billion.

The region’s smaller markets have outperformed their neighbors in terms of progress achieved.

Qatar awarded $22 billion so far this year against a full year target of $29 billion, while Oman at $11 billion is just shy of its $13 billion forecast. Kuwait awarded $30 billion of contracts in the first eight months of this year, more than the $27 billion forecast.

Despite the expected slowdown in Saudi Arabia, the country has the biggest pipeline of future projects with $800 billion in planned projects, followed by the UAE at $600 billion, Qatar ($200 billion) and Kuwait ($175 billion).

The GCC’s construction sector— buildings, property and real estate— has a pipeline of about $1 trillion in construction projects, while $400 billion in power projects and the same amount in transport projects are planned for the region.