The construction sector in Middle East and North Africa is experiencing a severe slump this year and faces headwinds in 2021 with a slow recovery, but the pace of recovery will be uneven across countries in the region, according to GlobalData, a leading data and analytics company.
The construction output growth forecast for the region for 2020 has been cut to -4.5% from the previous estimate of -2.4%, stated Globaldata in its report.
This reflects signs that the Covid-19 lockdowns and other restrictions had a more severe impact on construction activity than previous expected, it added.
Yasmine Ghozzi, Economist at GlobalData, said: "Spending is likely to gather some further momentum in the near-term as more parts of the region’s economy reopen. However, a further weakening in the labour market and a potential drop in expat numbers - mainly in the GCC - are likely to weigh on consumer spending in the period ahead, affecting future construction plans."
She cautioned that fiscal deficits and public debt levels will be substantially higher in 2021.
"Public investment is likely to be moderate, which will translate into fewer prospects for private sector businesses to grow – especially within sectors such as infrastructure," observed Ghozzi.
"Meanwhile, increase in taxes, selected subsidy cuts and the introduction of various public sector service charges will affect households’ purchasing power, having a knock on effect on future commercial investments," she added.
On Saudi Arabia, GlobalData has cut its forecast for construction output growth to -2.8% from an earlier estimate of -1.8%, and expects a recovery for the sector of 3.3% in 2021.
"This revision reflects the extended lockdown measures that were cautiously eased in July, along with an estimated one million expatriate workers who departed in the wake of the economic shutdown, as well as the uncertainty regarding the degree to which the government will be able to offset its oil revenue losses and stabilize its debt burden in the short term," explained Ghozzi.
On the UAE, GlobalData has further cut the forecast for construction output growth in the UAE to -4.8% from an earlier forecast of -2.1% in Q2 2020.
The UAE is facing a deeper-than-expected economic contraction this year, with the country’s central bank projecting GDP to shrink 5.2% down from its previous 3.6% forecast, she stated.
On Qatar and Kuwait, the expert said their growth rates for 2020 have been further cut to -4.5% and -9.5%, respectively, from an earlier estimate of -3.4%, -7.8%, while for Oman, GlobalData still holds its forecast at -8.1%.
"The Covid-19 pandemic and plunging oil prices have taken a toll on Kuwait’s economy. A deteriorating liquidity crunch and a delay in legal authorization to issue a new debt law has resulted in the country’s first ever credit rating downgrade from Moody’s," she added.-TradeArabia News Service