The GCC construction sector is poised for a period of strong growth in the short and medium term, outperforming the broader economy, expecting growth in the region of 3.5-4 percent annually on average in 2023-2024.
The Economist Intelligence says in a report on the subject that this optimistic outlook “reflects the available project financing boost from record high energy export revenues and the ongoing pursuit across the GCC of long-term development plans for the energy and non-energy sectors.”
The Economist expects local and foreign contractors, consultants, and suppliers to benefit from the booming construction sector and available opportunities to participate in lucrative GCC contracts from 2022 to 2026.
“Booming international energy markets and record high export yields, and foreign investment flows, will help improve national financial resources and enable GCC countries to move forward with their growth plans for strategic sectors that will support strong construction activity,” the report stated, which was seen by Economy Middle East.
The positive outlook for the GCC construction industry is based on the continued rise in oil and gas prices that began in late 2020 and continued until 2022.
The Economist Intelligence expects oil to trade in the $90-110 per barrel range for the remainder of 2022 and average prices will remain high at around $85-95 in 2023-2024.
Large pipeline of projects for delivery
Total contracts awarded for projects across the GCC rose again to over $100 billion in 2021 following the pandemic-induced decline in 2020 when the value of total contracts awarded fell below $70 billion.
GCC countries were awarded contracts worth $40 billion in the first half of 2022, and the region’s projects market is expected to boom until the end of the year and beyond.
Projects planned or under implementation in the GCC were estimated at around $2.65 trillion at the end of June 2022, The Economist said, quoting various official data.
The range of future opportunities is widespread, largely concentrated in Saudi Arabia and the United Arab Emirates, which account for about 60 percent and 20 percent respectively of planned construction and transportation projects in the GCC.
It added that the combined oil and gas sector will continue to account for the bulk of the contracts awarded, which often entail construction-related activity to maintain and enhance production capacity.
“Other projects related to residential and commercial real estate, basic infrastructure (transportation, energy, and water systems), and industrial developments (light and heavy manufacturing) will provide additional support to the construction sector and its supply chains. In June 2022, about $77 billion of construction and transportation projects were reported to be in the tender phase, and there were additional contracts worth $352 billion in the design and study phase – mostly in government-backed infrastructure projects linked to the development of highways, railways, seaports, airports, bridges, and water sewage systems. Real estate projects, energy, and transport transformation (especially rail development), capacity building of the energy sector (Oil, gas, and LNG production), and industrial developments will significantly emerge in the GCC project pipeline until 2026,” the report said.