Buoyant construction markets set to push tender inflation in Saudi Arabia and Qatar, says MACE
Construction-industry tender prices are expected to rise faster than inflation in Saudi Arabia and Qatar but are forecast to be more stable in the UAE, according to a report by MACE.
Annual tender inflation in Qatar is forecast at 5% this year, rising to 7% by 2017, the international consultancy said.
In Saudi Arabia, prices are expected to rise by 4% this year, and at 5% for the next two years.
Figures for both countries are above forecasts for consumer price inflation (CPI).
The CPI rate is forecast at between 2.6% to 2.9% in Saudi Arabia, whereas Qatar could post a slighter higher CPI of 3% to 3.5% in the short to medium term.
The MACE report noted Saudi Arabia’s record 2015 budget of $229bn, with its large allocations towards the education, healthcare, transport and water sectors.
The consultancy forecasts growth in the Saudi construction sector of 7% to 10%, pushing tender-price inflation.
“With expenditure on major projects set to continue, we anticipate that there will continue to be a strain on resources and there is likely to be upward pressure on tender prices,” it said.
In Qatar, the upward pressure on inflation is expected be moderated by the effects of lower oil prices and reduced global inflation.
Tender-price inflation in the UAE is forecast at a more modest 3% this year and next, increasing to 4% in 2017 as “major programmes increase pressure on resources,” the report said. That is still above current levels of CPI, which fell to 2.8% in November 2014.
‘Tender Cost Update Middle East and India’ is a quarterly report produced by MACE’s cost consultancy team, providing a snapshot of construction market conditions and trends in Middle East and India.