Falling oil prices and rising budget deficits are casting an inevitable shadow over Middle East construction activity this year. Oil prices have plunged some 40 per cent from last year's average, slashing income projections and forcing governments to search for spending cuts. As ever, allocations for capital projects are the easiest to target, while current spending is most likely to be spared.

Some major schemes have been put on hold in those countries feeling the pinch and searching for savings. Qatar, for example, having already postponed a major highway scheme, has no budget for the next phase expansion of the Ras Abu Fontas power and water plant.

The authorities in Saudi Arabia are slowing payments for projects under way and delaying the start of new ones. Both countries are looking hard at build-operate-transfer (BOT) options for developing infrastructure as a long-term solution to their investment requirements. Lebanon has a wealth of BOT projects in preparation for airports, free zones and toll roads.

Activity in the hydrocarbons sector, though not immune to the downturn, remains robust. Saudi Aramco has only two major projects out to tender but they could be worth nearly $3,000 million. Abu Dhabi National Oil Company awarded $2,000 million worth of work in the first half of the year and has contracts worth even more in the pipeline for petrochemicals, refining and gas development. Though it has no oil, Jordan is making the most of its mineral wealth, and has just announced plans for a further $1,500 million downstream investment in phosphates.

Income-generating industrial projects are also so far unaffected by the tighter economic climate. Saudi Basic Industries Corporation (Sabic) is in the middle of its third major expansion and several of its affiliates have tendered major projects.

Private projects are also doing well, with hotels and mixed-use real estate developments to the fore. Egypt is especially active with several prestige hotels and commercial complexes either recently awarded or out to tender.

On the following pages, MEED writers take a detailed look at developments in 15 regional markets: