A weak labour market and a potential drop in expats is likely to affect future construction plans.
Mena construction sector faces severe slump
01 November 2020
The construction sector in Middle East and North Africa is experiencing a severe slump this year and faces headwinds in 2021 with a slow recovery, but the pace of recovery will be uneven across countries in the region, according to GlobalData, a leading data and analytics company.
The construction output growth forecast for the region for 2020 has been cut to -4.5 per cent from the previous estimate of -2.4 per cent, stated GlobalData in its report.
This reflects signs that the Covid-19 lockdowns and other restrictions had a more severe impact on construction activity than previously expected, it added.
Yasmine Ghozzi, Economist at GlobalData, said: “Spending is likely to gather some further momentum in the near term as more parts of the region’s economy reopen. However, a further weakening in the labour market and a potential drop in expat numbers – mainly in the GCC – are likely to weigh on consumer spending in the period ahead, affecting future construction plans.”
She cautioned that fiscal deficits and public debt levels will be substantially higher in 2021.
“Public investment is likely to be moderate, which will translate into fewer prospects for private sector businesses to grow – especially within sectors such as infrastructure,” observed Ghozzi. “Meanwhile, increase in taxes, selected subsidy cuts and the introduction of various public sector service charges will affect households’ purchasing power, having a knock-on effect on future commercial investments.”
On Saudi Arabia, GlobalData has cut its forecast for construction output growth to -2.8 per cent from an earlier estimate of -1.8 per cent, and expects a recovery for the sector of 3.3 per cent in 2021.
“This revision reflects the extended lockdown measures that were cautiously eased in July, along with an estimated one million expatriate workers who departed in the wake of the economic shutdown, as well as the uncertainty regarding the degree to which the government will be able to offset its oil revenue losses and stabilise its debt burden in the short term,” explained Ghozzi.
On the UAE, GlobalData has further cut the forecast for construction output growth to -4.8 per cent from an earlier forecast of -2.1 per cent in Q2 2020. The emirates are facing a deeper-than-expected economic contraction this year, with the country’s central bank projecting GDP to shrink 5.2 per cent down from its previous 3.6 per cent forecast, she stated.
On Qatar and Kuwait, the expert said their growth rates for 2020 have been further cut to -4.5 per cent and -9.5 per cent, respectively, from an earlier estimate of -3.4 per cent, -7.8 per cent, while for Oman, GlobalData still holds its forecast at -8.1 per cent.
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