Saudi construction contract awards fall to $5 bln in Q2

Saudi Arabia has seen a decline in new construction contract awards to an estimated $5 billion in the second quarter, compared to about $11 billion in Q1, according to Faithful+Gould’s Construction Intelligence Report.

The decline, following the fall of construction as a percentage of GDP from 7 percent to 6.2 percent in the 12 months to Q1, indicates that the market is yet to stabilize.

This volatility is due to falling backlogs, which created a gap that awards in late 2016 failed to compensate for. Other factors include the low oil prices and Ramadan falling just before the slow summer season.

“Given $16 billion of awards have occurred in KSA in 2017 to date, our forecast for $27 billion in year may need to be revised upwards should the Crown Prince’s commitment for major awards later this year occur,” the report said.

Meanwhile, more projects have been awarded in the aviation, power, and water markets, thanks to government sector financing, with the General Authority for Civil Aviation (GACA) awarding an estimated $4.9 billion worth of contracts this year for five airports including in Jeddah, Taif, Qassim, Hail, and Yanbu.

The impact of Project Management Office (PMO) applied by the government sector will only be felt starting from next year. Progress in landmark projects like Makkah Metro has been slow, in the meantime, and is expected to be awarded before the end of 2017.

The private sector, on the other hand, did not recover as expected because of its focus on real estate projects, the report noted.