‘Saudi Arabia to see slow but better construction growth in 2017’

Riyadh stephendownes flickrSaudi Arabia has the largest construction market in the GCC and scores highly for the amount of investment made in the economy. (Image source: Stephen Downes/Flickr)A recently released report forecasts that Saudi Arabia will witness an overall construction growth of 1.9 per cent year-on-year for 2017

This will be a better year than 2016 as the industry recovers from the government failing to pay contractors and benefits from slightly improved liquidity and more efficient project implementation. According to Saudi Arabia Infrastructure Report Q1 2017, Saudi Vision 2030 is the key to opening up the infrastructure market, with the potential of private investment in transport sectors to energise the sector.

However, the outlook for growth in the Saudi Arabian construction sector over 2017 looks poor as liquidity remains tight and the government’s realignment of the project pipeline and effort to improve efficiency in project delivery through the introduction project management offices slows project progress,

The report maintained that from the demand side for the construction sector, it expects a continued lull of large-scale investment plans in the short term as concerns over the economy remain.

In September 2016, the government enacted wide-ranging fiscal reforms, which pared subsidies and salaries in a variety of sectors. The announcement of the Vision 2030 and associated National Transformation Plan (NTP) confirmed a number of the previously highlighted long-term themes for the Saudi Arabian construction market; namely infrastructure is at the centre of realising diversification plans and private sector participation will become increasingly common.

Meanwhile, Saudi Arabia’s Infrastructure RRI score has fallen to 66 out of 100 this quarter, although this still means the market scores well above the regional average of 54.5 for Middle East and North Africa.

Saudi Arabia has a huge construction market in the Middle East with enormous plans set by the government to expand the country’s infrastructure due to growing population and relative demand. Saudi has allocated US$44bn for investment in transport, telecommunications, water, agriculture and other related infrastructure, with main focus set on the transport development and housing programs.

The kingdom has huge pipeline of megaprojects, that is projects worth US$1bn and more, with more than 80 per cent of the investment flowing through these multi-billion dollar projects. Of the megaprojects pool, the top three ones includes the most talked about projects – KA CARE Renewable Energy Program worth US$150bn alone, Saudi Arabia Rail expansion programme worth US$97bn and KACARE Nuclear Power Reactor worth US$70bn. However, Saudi Arabia has many projects undergoing overruns especially time overruns. Most of these megaprojects are facing overruns during the construction period. 

Despite being a closed economy, due to vast opportunities offered over long term, Saudi Arabia becomes the key market for most of the international companies planning to enter the Middle East region. While identifying what are the existing opportunities in the country, also know about the risks involved and expected returns through the report titled Saudi Arabia 2016 Construction Outlook: Compare Rising Infrastructure Megaprojects Opportunities with Increasing Project Risk

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