Boston, MA -- (SBWire) -- 06/04/2014 --The second half of 2014 is set to see the lessening of the effects of new labour laws and the instigation of some of the glut of projects which were awarded in 2013, making for solid market conditions. We are maintaining our construction industry growth forecasts, which see growth at 7.2% in 2014. With project awards reaching record levels in 2013, adding to an already sizable backlog awarded since 2011, we believe the sheer size of the project pipeline in Saudi Arabia will ensure high growth rates over the medium term.
Labour shortages, as a result of the government's crackdown on visas and drive for Saudisation, and a cement shortage have been the overriding issues within the construction market so far over 2014. Projects have been delayed and many of Saudi Arabia's smaller contractors have gone out of business due to the increased cost of labour. We believe these issues will begin to dissipate over H214 and once resolved, the clearing of the construction backlog, combined with more recently awarded contracts, such as the USD22.5bn Riyadh Metro project, should see real growth return strongly from 2015, with 10.5% forecasted.
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Recent developments:
- The year 2013 was a bumper year for contract awards in Saudi Arabia. According to the NCB Construction Contracts Index, the value of awarded contracts during 2013 climbed to an all-time high of SAR293.4bn, growing 25% compared with 2012. This was after we anticipated that the value of contract awarded would accelerate in H2 2013. Heavy investments were made in transportation, power and the petrochemicals sectors.
- Metro Projects Galore: In August 2013, the contracts for construction of Lines 1-6 of the Riyadh Metro project were awarded to three consortia formed of international and local companies. In total, project is expected to cost USD22.5bn and be fully complete in 2019. Construction is hoped to start in 2014, although we anticipate some delays. In July, it was announced that the first phase of the USD16.8bn Mecca Public Transport Program was to enter construction in 2014, and be completed in 2017 - 15 international consortia have bid for the project as of January 2014. In November 2013, it was confirmed that Medina would also develop a mass transit metro system. Finally, Jeddah is developing three metro lines over the next six years with an estimated cost of USD6bn.
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Now Available: Saudi Arabia Infrastructure Report Q3 2014
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