Dubai’s Expo 2020 infrastructure spending to boost UAE construction sector
The UAE construction market remains on course to grow at a faster pace than the wider economy, fuelled by infrastructure spending in Dubai, according to one analyst.
BMI Research is forecasting growth of 6.6 per cent for the UAE construction market this year, considerably ahead of the IMF’s forecast of 2.6 per cent growth for the wider economy.
The value of the UAE’s construction industry is set to increase to Dh181 billion next year from about Dh162bn this year, the company said. BMI Research also predicts growth of more than 6 per cent for the following three years as Dubai ramps up spending ahead of Expo 2020, but a fall-off of 2 to 3 per cent a year after 2020.
It said that Dubai’s planned projects in real estate and energy are “progressing well”, but said that Abu Dhabi had been more exposed to the downturn in commodities as government and private sector spending were more reliant on the oil and gas market.
Using remittances from the emirate to Pakistan as a proxy for construction activity (because so many labourers in Abu Dhabi come from the country), it said there was a slowdown in activity for most of last year.
Despite this, BMI Research said that major projects such as the Route 2020 Metro extension on the Red Line in Dubai, the expansion of Jebel Ali Port and Al Maktoum Airport would continue to drive activity. It said that even the postponed Etihad Rail phase two – the link to Dubai and Abu Dhabi – is likely to be built, as it has been assured funding by the Federal Government and there remains a solid business case for the UAE to build its own network, regardless of the wider GCC project.
“The UAE would gain a major competitive advantage over regional peers with the introduction of a rail service,” the report said. “Congestion on the UAE’s road networks has become a major issue, so removing significant volumes of freight traffic would be of benefit to businesses and the population.”
William Bodie, an executive vice president at the US-based building consultancy Parsons, agreed with the report’s assertion that Dubai is likely to drive growth in the near future. “In our work as a consultant, we’re seeing a heavier volume of proposals and work orders in Dubai as compared with Abu Dhabi.”
Yet Patrick McKinney, the head of Gulf States for the contractor BAM International, said that BMI Research’s 6 per cent growth figure was “very optimistic”. “The real estate sector in Dubai is holding up for now, but generally I don’t think anyone is saying it is growing at 6 per cent. A lot of stuff has been … pushed back and delayed,” Mr McKinney said.
“If you talk to the big consultants, they’re laying people off, which is a harbinger of bad times coming.”
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