Market set to grow strongly during the next six months
The GCC projects market is expected to perform strongly for the rest of this year with $101bn of new contract awards.
According to MEED Insight’s GCC Projects Forecast & Review 2010, the market will grow by 103 per cent during the second half of 2010, taking the total GCC project spend for the year to $150bn.
“Our forecast for the second half of the year is good news for companies working in the projects market,” says Edward James, head of MEED Insight, the research and analysis arm of MEED business. “Clearly this figure is dependent on a number of big ticket projects proceeding as planned and being awarded in the next six months as scheduled. If there are delays on a number of schemes it will be difficult to meet this figure.”
Saudi Arabia leads the region with just over $46bn of contract awards, followed by the UAE at nearly $25bn, and then Kuwait at $16bn, a fourfold increase on the first half of the year.
“The project market in Kuwait has not lived up to its potential over the last 10 years,” says James. “However, the signs are now that it is finally pushing ahead with its long-delayed project plans such as the Subiya causeway, the Al-Zour North power and desalination projects, and the Failaka island development. We expect the state to comprise a large proportion of project activity over the next five years.”
The growth in the second half of 2010 reverses the downward trend experienced during the first half of this year when just $49bn of contract awards were made – down 19 per cent on the same period the previous year when $60bn of deals were struck.
“It is somewhat surprising to see project awards falling compared with last year,” says James. “The first six months in 2009 were at the height of the global recession, and we would have expected project spending to have been lower then than now, especially as there has been an improvement in the macroeconomic environment.”
The drop in project awards was despite an additional $35bn in GCC capital spending allocated in government 2010/11 budgets and a general improvement in the region’s economies.
Analysis of the data highlights a sharp drop of more than 60 per cent in the value of Saudi Arabian contract awards between the two periods from $29bn to just $11bn. The decline was partly as a result of delays on the $11bn Yanbu refinery project. Delays in awarding several other high-value deals were another factor.
“The downward correction in contract awards in Saudi Arabia is a concern because many in the market had been looking to the kingdom to make up the loss of project activity caused by the Dubai real estate crash,” says James. “However, we are hopeful that much of the shortfall will be made up in the second half of the year.”
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