MENA construction faces severe slump in 2020

The construction output growth forecast for the Middle East and North Africa (MENA) region for 2020 has been cut to -4.5% from the previous estimate of -2.4%, according to data and analytics company GlobalData.

Commenting on the statistic, which is telling of the impact on construction activity due to the COVID-19 lockdown, economist at GlobalData, Yasmine Ghozzi, said: “The construction sector will face headwinds in 2021 with a slow recovery, but the pace of recovery will be uneven across countries in the region. 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 labor 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.

“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. 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.”

Saudi Arabia

GlobalData has cut its forecast for construction output growth for Saudi Arabia to -2.8% from an earlier estimate of -1.8%, and expects a recovery for the sector by 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 stabilise its debt burden in the short term.

UAE

The data and analytics firm further cut the forecast for construction output growth in the UAE to -4.8% from an earlier forecast of -2.1% in Q2 2020. 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.

Kuwait

Ghozzi said: “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 global integrated risk assessment firm Moody’s.” GlobalData has cut further the growth rate for Kuwait in 2020 to -9.5% from an earlier estimate of -7.8%. It still holds its forecast for Oman at -8.1%.

Egypt

Egypt’s construction sector is set to continue performing well in spite of the poor performance of the overall non-oil sector, which has been affected by a semi-lockdown since mid-March. The building and construction sectors were the most resilient in the face of the semi lockdown imposed during the height of the pandemic. GlobalData expects construction to grow at 7.7% in 2020, slowing from 9.5% in 2019 – given a short-term slow down due to the pandemic – and 8.9% in 2021. The industry is also expected to continue maintaining a positive trend throughout the forecast period.


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