GCC projects market slumps in first half of 2018

23 July 2018
The IMF’s prediction that economic growth will slow in the region in 2018 has been borne out by a further drop in project awards

Data from MEED Projects on contract awards in the GCC in the first half of 2018 suggests this year could be one of the worst years for the regional projects market for a while.

The total value of GCC project awards in the first half of 2018 contracted by 19.9 per cent compared with the same period in 2017, resulting in $45.2bn of engineering, procurement and construction (EPC) contracts awarded so far.

Although the slowdown may be partially due to the earlier timing of Ramadan this year, the downward trend has been evident since 2015, when the GCC hit a high of $177bn of EPC contracts awarded. Comparing the first half of 2017 with the first six months of 2016 shows a drop of 16.9 per cent, which means the value of project awards has plunged by more than 30 per cent in just two years.

First half of 2018

On a case-by-case basis, there are significant differences in how markets performed in the first half of 2018. The UAE accounted for more than 50 per cent of the total value of projects awarded, making it the only market with year-on-year growth, up 8.5 per cent compared with the first half of 2017.

Although Dubai’s construction sector is traditionally the main driver of growth in the UAE, the single-largest EPC contract in the first six months of 2018 was awarded by Abu Dhabi National Oil Company for its $3.1bn upgrade of the Ruwais refinery.

During the period, Adnoc awarded capital-intensive utility and hydrocarbon projects amounting to $5.2bn-worth of EPC contracts, resulting in increased optimism for the local oil, gas and petrochemicals industry.

Steep fall

In sharp contrast to the UAE, project awards in the five other GCC economies plunged 36.8 per cent in the first half of 2018 compared with the same period in 2017. The biggest drop – of 62.5 per cent – was in Kuwait, followed by 53.9 per cent in Oman.






Saudi Arabia, historically the largest GCC market, awarded only $12.3bn-worth of projects, down 18.2 per cent year-on-year, echoing the kingdom’s past few difficult years.

Bahrain contracted by 2.8 per cent, but this is expected to pick up in the second half of the year.

Future outlook

Despite the strengthening of oil prices, the period ahead should be anticipated with only mild optimism. With the slower summer months to come, it remains uncertain whether 2018 will see the GCC countries pass $100bn in projects awarded.

This is in spite of a solid pipeline of projects scheduled to be awarded soon, in particular in the transport, construction and power sectors.

Several major projects across the region are scheduled to be awarded in the second half of 2018, but given the overall market slowdown, the outlook for these projects appears uncertain.

The market that investors are most confident about is Dubai, where there are $17bn-worth of projects in the pipeline. The emirate has consistently led the way over the past five years, no doubt thanks to its lower reliance on oil prices, but also testament to its efficient projects market set-up.









By Igor Gavric

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