GCC Construction Sector Faces Challenges Despite Improved Market Sentiment

GCC Construction Sector Faces Challenges Despite Improved Market Sentiment

28-Jan-2018  Farah Al-Toukhi

Business sentiments across GCC’s construction sector have improved over the year despite challenging economic conditions, a new study has found.

According to the Pinsent Masons GCC Construction Survey, construction sentiment has improved by approximately 7% (from 32% to 39%) over the last year. Almost 38% of respondents to the survey are expecting the country to provide the most opportunity over the next 12 months. This is compared to the 35% who answered the same in 2016. The improvement comes as the sector faces payment delays and cash flow problems, mainly due to the low oil prices.

However, despite the optimism, 20% of those surveyed in the GCC expect their order books to decline by more than 10% in the coming months, compared to 16% two years earlier. This is in part due to 86% of businesses feeling that they had become less favorable during 2017. In addition, a significant number of companies said payment periods were longer in 2017 compared to the same time last year.

Improved market sentiment in the GCC’s construction sector has improved over the last two years. This makes the U.A.E  the number one market expected to deliver growth in 2018.

The improved opinion of the sector is important for future projects in particular. “Optimism towards the GCC’s construction sector saw an increase from our 2016 survey, despite ongoing challenges with lower oil pricing and headwinds facing the private non-oil sector,” said Sachin Kerur, Head of Middle East Region at Pinsent Masons. “The U.A.E. is set to see an increase in the number of projects during 2018 and we expect the country to remain in top position, particularly in the lead-up to Expo 2020.”

The construction survey provides some insight of the opinion from the GCC construction sector where the majority of the companies are involved in projects with a value of over AED 500 million. However, there continue to be ongoing concerns relating to delayed payment, the rising cost of capital and increased number of disputes.

“Whilst analysts predict a slight economic revival across many GCC markets during 2018, the survey results are indicative of what has been a challenging time for the construction sector – which has grappled with the impact of lower oil prices and ongoing geopolitical tensions,” added Sachin.

The majority of respondents to the survey indicated that they continue to find the U.A.E is the easiest GCC country to do business in with Oman following in second place. Dubai, in particular, is viewed to be the emirate that has the most appropriate location to solve regional disputes.

https://www.forbesmiddleeast.com/en/gcc-construction-sector-faces-concerns-despite-improved-market-sentiment/

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