Saudi Arabia’s construction sector to grow at 7.2% E-mail
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Thursday, 27 February 2014

The Saudi construction sector is set to grow at 7.2 per cent this year, according to a report by Business Monitor International (BMI), which predicts project delays.

In its Saudi Arabia Infrastructure Report Q1 2014, BMI attributes the delays to labor and material shortages. However, with project awards continuing at a rapid pace, and a sizable backlog awarded since 2011, the sheer size of the project pipeline in Saudi Arabia will ensure high growth rates over the medium term, it said. As such, the report expected activity to return to its buoyant trend from 2015 onwards.

In the last quarter of 2013, the report downgraded its near-term outlook for growth as labor shortages, as a result of the government’s crackdown on visas and drive for Saudization, were set to delay projects. This has played out as the industry reported serious delays and project cancellations over 2013. At the same time, a severe cement shortage led the government to initiate measures including emergency funds to import 10 million tons of cement and construction of new facilities which should ease the shortfall over the year.

BMI expects these issues to continue to weigh on growth into the first half of 2014 in the near term. However once resolved, the clearing of the backlog, combined with more recently awarded contracts, such as the $22.5-billion Riyadh Metro project, should see growth return strongly from 2015, at an estimated rate of 10 per cent.

The contracts for construction of Lines 1-6 of the Riyadh Metro project were awarded in August to three consortia of international and local companies. Construction is hoped to start in 2014 – although BMI anticipates some delays – and be fully complete in 2019. In July, it was announced that the first phase of the $16.8-billion Makkah Public Transport Program was to enter construction in 2014, and be completed in 2017. The long-delayed Land Bridge project is also moving forward, with a contract for the design work on the $7-billion railway awarded in August. The design phase is expected to last two years.

Another dynamic sub-sector in Saudi Arabia continues to be power plants and transmission and distribution (T and D). The $80-billion (excluding nuclear), 10-year investment plan for electricity infrastructure (2008-2018) has led to significant activity in the energy sector.

Source: Gulf Construction



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