After six challenging years for the GCC construction industry, contractors, consultants and suppliers can at last look forward to a return to growth and the prospect of rising project opportunities in 2022.
With some $1.4tn worth on construction and transport projects planned in the GCC that have yet to see their main contracts awarded, the pipeline of future project opportunities is vast, with Saudi Arabia (63 per cent) and the UAE (21.5 per cent) accounting for nearly 85 per cent of the GCC’s planned future projects.
The outlook for the GCC construction industry has been transformed in 2022 by the sustained recovery in oil prices that started in the second half of 2020, and which continued through 2021 and into 2022.
The increased revenues from oil exports has eased the pressure on national finances and is enabling governments to stimulate the recovery through investment in strategic infrastructure projects.
At the same to increasing consumer confidence, the return of international travel, and rising property prices are enabling renewed private investment in commercial real estate projects.
But, while the prospects for oil prices remaining high in 2022 and 2023 are boosted by the re-opening of the global economy after the restrictions caused by the Covid-19 pandemic, the war in Ukraine is a reminder that the recovery is fragile.
The uncertainty of a war in Europe that involves some of the world’s biggest economies has added to the inflationary pressure caused by post-Covid supply chain bottlenecks, which are threatening to dent the global recovery. Construction companies must be aware that the recovery is still fragile, and that the uncertainty could delay key spending decisions on projects in the region.
After so much uncertainty, confidence remains a key challenge for the construction industry. Contractors say they are now more wary of signing new contracts after being financially hurt by the pandemic in 2020 and 2021 and some clients have not compensated them for delays.
When it comes to new awards, taking future risks on pandemics and viruses may be an issue for some contractors as clients do not usually accept taking such risks.
Another concern is supply chain bottlenecks and rising costs. Ships and ports are all facing setbacks and this trend will continue and will inevitably affect projects that are dependent on foreign materials. Some projects will have to be delayed.
Saudi Arabia leads the way
For future growth, much will depend on Saudi Arabia, which plans to deliver some $1tn of projects as part of its Vision 2030 strategy that aims to transform the kingdom’s economy.
While an uptick in contract awards is widely expected, the surge in tender activity and the race for delivery is creating pressure. Many projects are coming up at the same time and this will put a strain on the supply chain and the capacity of subcontractors.