It has been more than 18 months since the pandemic took hold the world over. Over this time, few sectors and industries globally have been left untouched by the economic upheaval and disruption left in Covid’s wake. The construction market has been no exception. Experts from Deloitte and MEED Projects walk through the state of GCC’s construction projects market and its outlook.

In 2020 total contract awards of construction projects dropped 35% to just $69 billion as the coronavirus, falling oil prices and lower government spending precipitated a dramatic slowdown in capital expenditure. As a result, last year was the worst for the market in nearly two decades.

Yet while the virus’ effect on spending levels is undeniable, not every market and sector experienced the same impact. Worst hit were Saudi Arabia and the United Arab Emirates (UAE) where year-on-year contract awards declined 53% and 33% respectively according to data from MEED Projects.

However, expenditure in Qatar fell by only 6%, while in Oman and Kuwait award values actually increased on 2019 totals, albeit from a much lower base.

Outside the GCC, Iraq and Egypt also registered growth. Individual sector performance was also uneven. Construction, historically the largest market segment, saw deals fall 29% year-on-year to $29.7 billion, while oil and gas had precipitous falls of 74% and 76% respectively. On the other hand, both the power and water sectors grew marginally on their 2019 totals, reflecting the growth over the past half-decade in renewable energy production and water treatment and distribution projects.

The overall decline in spending was compounded by a fall in contracts moving from tender to final award. In 2019, 88% of 667 projects under bid evaluation at the start of the year were awarded within the next 12 months. However, in 2020 only 58% of the 713 under bid projects were awarded over the same timeframe, reflecting the inherent uncertainty caused by the pandemic and the subsequent need for many clients to reconfigure their schemes.

Covid-19 has not been the only factor behind the market’s performance. In Dubai, once the single largest projects hub in the region, the ongoing oversupply of property has been the overriding driver for the decline in its market. While Abu Dhabi and the Northern Emirates have been reasonably stable over the past few years, a lack of new project launches in 2020 resulted in the Dubai market shrinking to just a quarter of its 2017 peak, thereby making Abu Dhabi the largest projects market in the federation for the first time since 2013.

After the 2020 annus horribilis, the market’s expectation for 2021 was high. But while it has performed better, the recovery has arguably not been as quick or as strong than might have been hoped. Contract awards for the first nine months of the year were $58 billion compared with $69 billion for 2020 as a whole.

The 2021 market is therefore likely to outperform the year previous but is still going to fall far behind the 2019 number as the region continues to shake off the pandemic’s lingering impact.

Copyright @ 2023 BHM International. Webdesign : Tomsher Technologies