Expert predicts that Kingdom will see a drop in number of construction and infrastructure contracts awarded this year
Saudi Arabia will see a sharp drop off in the number of construction and infrastructure contracts awarded in the Kingdom in 2012, a leading expert has warned.
Speaking at the Saudi Mega Infrastructure Projects Summit in Riyadh, Edward James, head of MEED Insight, said that he expected $50bn worth of contracts to be awarded in the Kingdom this year, down from $70bn in 2011.
James added that while Saudi Arabia has many projects in the bidding stage, it is still struggling to process them into contract awards. This is due to a combination of slow-decision making by government ministries, logistical issues and contractor constraints.
Despite these issues, James said that he foresees a rebound in the Saudi project market because of rising oil prices and an inherent need for capital investment.
“The long term prognosis is good, and we expect a return to activity of about $70bn a year from 2013 onwards,” he explained.
Despite the slowdown, Saudi Arabia remains the GCC’s largest construction market by a long way. More than half the projects awarded in 2011 came from the country, while some $300bn in projects have been planned.
The major factor driving demand in the kingdom is a burgeoning population that will require more housing than is currently available. Secondly, its underdeveloped infrastructure will need to be upgraded to cope with the population increase, James said.