Construction expansion forecast for MENA could be undermined by market threats

Recent escalation in oil price volatility and the impact of coronavirus on global markets could undermine a steady construction expansion in the Middle East and North Africa, according to Mace’s latest Market View.

The Middle Eastern and North African construction sector is forecast to expand by over 4% per year during the next two years, but downside risks could impact the outlook for growth. 

While prospects vary from nation to nation, Egypt is currently forecast to witness the strongest growth in the region, with a GDP growth of 12% by 2021. 

The anticipated economic boost from Dubai Expo 2020 – which is expected to attract 25 million visitors – is potentially good news for the UAE’s construction sector.

In the Kingdom of Saudi Arabia, construction activity will accelerate from 1.6% in 2020 to 3.2% in 2021. 

Downside risks across the region come from coronavirus’ impact on global demand, negatively affecting business confidence and investment, and the fiscal impact of oil price volatility. 

Paul Donaghy, Head of Cost Consultancy for MENA at Mace, said: 

“Faced with such uncertainty, procurement strategy should maximise flexibility to enable constructors and project teams to mobilise the most appropriate response to the challenges faced. In the event the impact of coronavirus is limited to a short and sharp shock, the outlook is relatively buoyant and the best project outcomes will be delivered through early contractor engagement, maximising scope for competition and a pragmatic approach to risk. If the impact is more severe, it will be important to assess project-level risks and devise suitable mitigation strategies.”