Value of total projects awarded in region in first six months slips 19 per cent
UAE accounts for 38% of value of projects awarded in GCC in first half of year
The UAE accounts for about 38 per cent of the value of project awards in the GCC in the first half of the year even as the total value of plans in the region fell 19 per cent on the back of lower economic growth, according to MEED Projects.
Some $56 billion worth of projects were awarded in the first six months of the year compared to $69b in the same period last year. The value of contracts awarded in the UAE was $21.3b in the period, followed by Saudi Arabia, the region's biggest economy, at $15.8b and Kuwait at $6.9b.
The publication noted there are signs there would be an uptick in awards in the second half of the year as economies in the region are adjusting to lower oil prices.
“Although market performance year to date has been sluggish, there have been signs of a pick-up in activity,” says Ed James, Director of Content & Analysis at MEED Projects. “The award of more than $5bn worth of EPC contracts on the new Duqm refinery in Oman at the beginning of August, plus a raft of new project announcements in Dubai, and the gradual re-emergence of activity in Saudi Arabia have provided a degree of impetus that points to a strengthening market."
“There’s no doubt that the past two years have been tough for the projects supply chain as government spending has slowed. But with construction companies now more efficient, the private sector more active and the number of PPP projects growing by the week, there is cause for optimism."
The UAE's economy is expected to pick up in the second half of the year as governments spend more money ahead of Dubai's hosting of Expo2020, according to economists.
The price of crude has plunged to half of what it was three years go. Though the glut continues and has been exacerbated by an increase of supply globally, the non-oil economy of the UAE is forecast to expand thanks to a rise in global trade, tourism and investment in infrastructure ahead of the Dubai Expo.
The non-oil economy will rebound this year, the International Monetary Fund said in May. Non-oil gross domestic product is forecast to accelerate by 3.3 per cent this year from 2.7 per cent in 2016, according to the Washington-based organization.
Abu Dhabi Commercial Bank and Standard Chartered, the London-based emerging market specialist lender, are both forecasting that the non-oil economy will grow 3.2 per cent in 2017.
About Dh11 billion worth of contracts related to the Expo are expected to be awarded this year.
Contracts to build the three major pavilions representing Expo 2020’s main themes of sustainability, opportunity and mobility, will be awarded in the fourth quarter of this year, Ahmed Al Katib, the event's vice-president of real estate, said in July. A tender to build up to 30,000 car parking spaces around the outer elements of the site is also due to be floated by the end of the current quarter.
“Longer term, there is even more reason to be hopeful," Mr James of MEED said.
"Currently, there are over $2 trillion of known active projects in the pipeline across the GCC according to MEED Projects data. The majority of these are infrastructure schemes that are essential to the future prosperity of the region, job creation and economic diversification. While inevitably not all will come to fruition, we can be confident that there is still a large amount of work to come regardless of the oil price.”