GCC construction sector recovery likely in Q4; Industry Insiders

With the number of COVID-19 cases falling and the economy easing back into normalcy, new contracts will be awarded.

By Rahul Vaimal, Associate Editor
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Industry experts believe that the GCC construction sector market will bounce back in the fourth quarter. Recovery in oil prices and increased optimism regarding economic growth will lead to the gaining of new large contracts. The construction sector of the region had witnessed a drastic fall due to the lockdown.

“Ongoing construction activity has already resumed its recovery. While market sentiment leans towards a recovery in the first quarter of 2020, subject to extraordinary events notwithstanding, we are optimistic that new awards will be announced in the fourth quarter of 2020 to get the market revving next year,” said Avin Gidwani, CEO of Industry Networks.

“As long as the oil price remains above $50, the sector will benefit from it as the governments will continue to build infrastructure and expand housing facilities for its people. So, it’s just a matter of time for the sector to come back,” says Rizan Sajan, chairman of Danube Group while pointing out that the improvement in the sector can be directly linked to the oil prices.

“Oil is already trading above $40, while half of the world is still under partial lockdown. Oil price will rebound to above $50 in a few months when the construction sector will see new projects coming up,” Mr. Rizan added.

Most oil experts predict that crude prices would range between $40 and $60 a barrel and a high of $70 and $80 in the short to medium term.

Industry data shows that the second-quarter was disastrous for the GCC building industry as new contract awards and project completions dried up in May. Contracts were $192 million (Dh705 million) were awarded in May 2020, the lowest level of awards since 2010, reveals the BNC Projects Journal. Both COVID-19 and Eid Al Fitr together caused the record low in May 2020.

BNC Projects Journal data has shown that out of $2,435 billion worth of projects, some 37 percent of the $902.1 billion worth of projects are on hold in the GCC region. Of those $902.1 billion, some 66 percent, or $600.1 billion, of those projects are utility projects at the end of May 2020.

“Despite the current situation, marked by the COVID-19 pandemic, construction of the ongoing projects are going on. The market performance should not be judged by the current pandemic situation – which is very rare. The construction activities in Saudi Arabia and UAE will continue as before. So, the question of bottoming out doesn’t arise. Having said that, the developers and contractors might face a slowdown of activities for a year and a half,” said Josef Kleindienst, chairman of Kleindienst Group as he firmly believes that the oil-exporting countries will continue to build infrastructure.

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