- Sharp slowdown in GCC projects in 2016
- Impact exacerbated by the contrast with record 2015
MEED Projects director of content and analysis Ed James has warned project companies they should prepare for a sharp contraction in the GCC projects market in 2016, as a result of low oil prices.
There is going to be some trouble ahead for the projects market, said James, speaking at MEEDs Qatar Transport Forum 2015 in Doha on 15 September.
I am increasingly concerned about activity next year, particularly in the regions two biggest markets, Saudi Arabia and the UAE. There is potential for a very sharp fall in 2016 and 2017.
James said the severity of the projects market contraction would be exacerbated by the contrast with 2015, which he said was on course to be a record year.
Based on data from regional projects tracker MEED Projects, James said that about $124bn-worth of project contracts had been awarded in the GCC in the first eight months of 2015, and that the region was on track to meet its full year forecast of $172bn.
By and large, most countries are keeping up with the forecast, said James. 2015 will be a record year despite falling oil prices.
He said that it was not all plain sailing, however, and that there were already signs of a slowdown in Saudi Arabia.
The exception is Saudi Arabia, James said. We forecast $49bn of awards in 2015. But with only $33bn awarded in the year to date, the kingdom is lagging behind its forecast. It is perhaps no surprise as the kingdom is more affected by oil prices than anybody else.
He said the UAE had awarded about $25bn of project contracts in the first eight months of 2015 and still had some way to go to achieve its forecast for the year of $43bn.
But the smaller markets are strongly positive, with Qatar awarding $22bn so far this year against a full year target of $29bn, and Oman at $11bn so far against a forecast of $13bn.
But James said the regions star performer of the year is Kuwait, which had already awarded $30bn of contracts in the first eight months, more than the $27bn it was expected to award in the full year.
Despite the slowdown in Saudi Arabia, James said the MEED Projects database showed the kingdom had the biggest pipeline of future projects, with about $800bn of schemes planned.
The UAE is second, with about $600bn of planned projects, Qatar at $200bn of planned projects and Kuwait at about $175bn.
James said Qatar, while much smaller than Saudi Arabia, offered a more predictable project pipeline because it has to meet its commitments to host the 2022 Fifa football World Cup.
The GCCs construction sector buildings, property and real estate offers the biggest segment of future projects, with a pipeline of about $1 trillion of construction projects on the MEED Projects database.
The pipeline of power and transport projects in the GCC each shows about $400bn-worth of schemes planned.