SAUDI ARABIA. According to a new medium term outlook BofA Merrill Lynch Global Research Report ‘GCC 2020: Time to Shift Gears’, Saudi Arabia is set to take the lead in regional infrastructure investment and construction spending.
Over the next 15 years, the MENA construction sector will be a key beneficiary of the implementation of structural reforms to raise productivity of the non-oil sector and the economy’s potential output.
“Due to many years of underinvestment, we expect Saudi Arabia to take the lead in terms of construction spending in the MENA region as the Kingdom responds positively to pressing social needs such as labor, housing and education,” said Philip Southwell, Bank of America Merrill Lynch president and country executive, Middle East and North Africa.
The MENA infrastructure and construction market is among the world’s most attractive given its sheer size, according to the report. Forecasting figures predict a total of US$4.3 trillion will be invested in construction projects across the MENA region by 2020, representing an increase of almost 80 percent from today’s spend in the sector.
To put these projections in a broader context, the region is expected to account for 12 percent of the global emerging markets and 4.4 percent of the world construction markets within the next decade. Saudi Arabia is expected to continue leading the way.
Although MENA contract awards have been somewhat disappointing for the period January to May 2012, declining by 41 percent from a year earlier, the main reasons for this decline can be primarily attributed to delays in awarding petrochemicals projects in Egypt and delays in awarding construction and infrastructure contracts in the UAE, Kuwait and Iraq.
“The construction and infrastructure sub-sectors in Saudi Arabia, however, remain strong, growing by 177 percent over the same period, and currently accounting for 46 percent of the 2012-2013 MENA project pipeline totaling US$448 billion,” said Mutashar Murshed, Merrill Lynch Kingdom of Saudi Arabia CEO.
“It is a trend we expect to continue,” Southwell said. “With its young and expanding population, Saudi Arabia should remain the most buoyant market, in line with its overall economic development plan. Furthermore, the recent approval of the mortgage law should help to drive growth in residential construction in response to the current housing shortage.”
To see the full report, please click here.
Photo: Philip Southwell, Bank of America Merrill Lynch president and country executive, Middle East and North Africa.
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