Authorities will look towards private sector participation to continue the level of infrastructure development
Infrastructure plans are unlikely to face major delays in the UAE, despite a slowdown in the real estate market.
Prices are expected to stabilise in 2016 in many parts of the Dubai real estate market and analysts forecast there will be a decrease in new projects as supply from previous development cycles begins to enter the market.
In December 2015, the Dubai government said it plans to spend AED6.4bn ($1.74bn) on infrastructure in 2016, up from AED5.3bn in 2015, and is planning to maintain the size of its investments in infrastructure over the next five years.
Plans to spend 14 per cent of its AED46.1bn budget on infrastructure and the increase in spending indicates that recently awarded projects will move forward as planned and that contracts being tendered will be awarded in 2016.
The largest government contract being tendered is for an extension to the Dubai Metro, to connect the rail system to the Dubai Expo 2020 site, which is known as Route 2020.
Despite the governments pledge to ramp up infrastructure spending, authorities will need to find alternative financing solutions in order to press ahead with enough projects to service all new and existing residential and commercial developments.
We have seen PPP structures work well in the power and water sectors. Regional governments may have to look at ways to apply the same principles to other areas, such as transport and real estate, said Karim Nassif, primary credit analyst at ratings agency Standard & Poors.
Overall, the UAE is expected to continue to press ahead with major infrastructure schemes, particularly Dubai because of the developments required in time for Expo 2020. While analysts have said that spending by the government in Dubai may drop, infrastructure schemes will continue, with the emirate proving more resilient against the regional projects slowdown.
MEED Projects has forecast that the UAE will post $36.5bn-worth of contract awards this year, down only marginally on the $37.3bn awarded in 2015.
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