Coronavirus: MENA region to face a construction downturn in 2020 due to pandemic

Increasing number of COVID-19 cases and slumping oil prices driving downturn

The construction sector in the Middle East and North Africa (MENA) region is set to face a downturn in 2020 due to the increasing number of COVID-19 cases in the region and a slump in oil prices, a new report by GlobalData, an international data and analytics company.

In a report, it stated that the construction output growth forecast has been revised to -0.8%, down from the previous projection of 1.4% in mid-March (and from 4.6% in its Q4 2019 update).

Yasmine Ghozzi, economist at GlobalData, said: “Oil and gas dependent countries will face funding challenges given the decline in oil prices, which will have a negative impact on investment in major public-funded development projects.”

“Although an historic agreement on production cuts was reached on April 12th between OPEC members and the group’s major oil producing allies to cut production by 9.7 million barrel per day, oil prices are set to remain at low levels given the severe decline in global demand,” stated Ghozzi.

Although Saudi Arabia continues to maintain its renewable energy program impetus and Aramco is issuing tenders for offshore construction works, other GCC countries, including Oman and Kuwait, are revising their spending plans and their construction pipelines, she added.

Ghozzi said: “Dubai’s Department of Finance has also ordered a 50% cut in capital spending and has called for a freeze on new public construction schemes.”

“Outside the GCC, the Iraqi Government announced that COVID-19 pandemic constitutes a force majeure for all projects and contracts, creating uncertainty in Iraq’s construction sector,” she said.

Ghozzi also pointed out that the outbreak threatens to devastate Egypt’s $12.5 billion-a-year tourism industry, which accounts for 12% of GDP.

“It will likely have a severe impact on the commercial buildings works, as investment plans in the hospitality sector are expected to be halted, if not cancelled outright,” she concluded.

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