New Construction research report from Business Monitor International is now available from Fast Market Research
Boston, MA -- (SBWIRE) -- 02/27/2013 -- BMI View: Fuelled by a flurry of contract awards in 2012, we expect to see a buoyant 2013 and beyond. Whilst the sheer size of the Saudi construction industry will force the growth to moderate in the longer term - largely due to base effects - we nevertheless highlight the vast opportunities within the wider construction sector. Funding - unhampered by any financial woes - is unlikely to run dry, nor lose support, as the government's vast infrastructure investment scheme aims to both diversify away from oil, but also to keep protests at bay and stave off public discontent.
We forecast a robust 7.5% real industry growth for 2013. This reflects the significant number of contracts awarded both in 2011 (140% year-on-year (y-o-y) increase), and in H212 (50% increase y-o-y), as well as increased government spending, which was pledged in response to popular discontent and the Arab Spring. Over the medium term, we forecast healthy annual average growth of 5.6% between 2013 and 2017.
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Factors Underlining Bullish Outlook:
- Electricity Revamp: One of the most dynamic sub-sectors in Saudi Arabia continues to be power plants and transmission and distribution (T&D). The US$80bn (excluding nuclear), 10-year investment plan for electricity infrastructure (2008-2018) has led to significant activity in the energy sector. According to BMI forecasts, another 30 gigawatts (GW) will be added to the current estimated capacity of 51,6000 megawatts (MW) by 2020. The exact price tag still varies from one press release to another. Yet, the trend is clear: the Saudi government is ready to pay, and has thus far been true to its word. Saudi Arabia remains the top performing market in BMI's Middle East and North Africa (MENA) power risk/rewards ratings (RRRs) with an overall score of 62.69, which is well above the regional average of 50.04. In September 2012, state-owned Saudi Electricity Company awarded the prestigious US$3.12bn contract for the 2.7 gigawatt (GW) power plant in southern Jeddah.
- Transport Upgrade: The transport sector is also booming, especially rail infrastructure - with projects worth US$24bn under way or in the pipeline. To support this flurry of transport contracts and to ease layers of red tape the government set up a Public Transport Commission in October 2012.
- Generous Social Spending: Huge investment into the social infrastructure sector is likewise in the pipeline, in part to appease the populace. Both the SAR1.44trn (US$385bn) Ninth Development Plan (2010-2014), and social benefit packages worth a total of US$130bn - the latter announced in response to the protests which swept the region during 2011 - are heavy on social infrastructure spending. Healthcare and education investment are also growing, and the potential for private sector participation is increasing.
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