Oil price strengthens outlook for MENA construction
Mace’s latest market view for the Middle East and North Africa (MENA) explains how increasing oil prices are laying the foundations for a stronger construction outlook in the region.Despite this potential for growth, the report notes that the volatility of oil prices creates uncertainty around projections, while the escalation in geopolitical tension in the region presents a further risk to stability. The evidence of this remains fresh in the mind, with these factors playing their part in the moderate 1.5% GDP growth in 2019.
Although performance in 2019 has been subdued, the report suggests that economic growth is expected to accelerate in 2020. With oil remaining a major economic contributor to many MENA nations, the stronger outlook for oil prices – driven by tightening global supply – is feeding into this positive forecast.
This is boosting overall economic confidence and is helping to lay the foundations for a solid performance in the construction sector. That said, according to BMI, the pace of growth in construction activity across MENA is actually forecast to slow from 6.4% in 2018 to 5.9% in 2019 and 5.7% in 2020.
Even with this reduction, figures remain promising and many of the MENA nations have ambitious strategies in place to promote private sector investment and enhancements to existing infrastructure. Against this backdrop, the region’s construction project pipeline is significant, with many sizeable schemes working their way through design and planning.
Mace’s report does warn, however, that a healthy project pipeline doesn’t necessarily translate into a buoyant construction sector. Project delivery in the MENA region currently faces headwinds from rising public debt and asset price weakness in the commercial and residential sectors.
To read a comprehensive overview of the MENA market, please download the full report.
Mark Taylor, Mace’s Regional Director for MENA said:
“Oil producing nations are striving to broaden their economic base, but oil revenue still makes a significant contribution to economic activity across MENA nations. With oil prices recently exceeding $70 per barrel, the outlook for public sector finances has improved significantly. If this boosts public sector project delivery, there is a risk that available capacity - depleted during the recent downturn - will be swiftly absorbed.”
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