Dubai, UAE— While most of the GCC countries struggled to win contracts for new projects in their countries, Saudi Arabia bucked the trend by winning contracts worth $54.2 billion in 2022 as against $53.9 billion in 2021.
According to a new report by Kamco Invest, the decline of GCC contract awards was affected by high inflation and continuing supply chain problems mainly due to China’s intermittent Covid-19 restrictions which are now lifted.
The hiking of benchmark rates by global and regional central banks to combat runaway inflation also impacted project funding in the GCC.
The decline in 2022 also reflected limited big-ticket projects outside the Saudi project market.
The outlook though for 2023 remains bright for the GCC projects market with more than $110 billion worth of projects already in the tender stage, according to MEED Projects.
Near-term forecast also remains positive for the region mainly driven by Saudi Arabia’s construction sector mostly related to the NEOM giga projects.
The region is one of the world’s most active projects markets. Thanks to high oil prices, governments have been able to spend more on their capital projects spending programs, which makes it one of the few markets growing globally.
However, GCC project awards contracted during 2022 as global economic challenges mounted.
The total value of GCC contracts awarded declined by 18.7% y-o-y during 2022 to $93.6 billion as compared to $115.2 billion in awards during 2021.
This was the lowest project awards since 2005, barring the pandemic induced decline in 2020, says the report.
All GCC countries, barring Saudi Arabia, witnessed a y-o-y decline in their aggregate 2022 value of projects awarded.
In addition, total value of project awards was above the US$ 100 billion mark every year for the last decade except for the pandemic years from 2020 to 2022.
MEED previously reported that three out of the ten big projects awarded in the kingdom were for the NEOM project.
The UAE ranked second recording total contract awards of $19.2 billion as against $25.9 billion during 2021.
The Saudi giga projects market alone has more than $750 billion worth of contracts in the pipeline, while there are major investments planned in Qatar following the World Cup and a substantial oil and gas investment program in Abu Dhabi to name just a few examples.
In total there is more than $1.4 trillion worth of projects in the pipeline, much of which will be awarded in 2023.
Saudi Arabia, UAE and Qatar accounted for a combined 93.6% of the total value of contracts awarded in the GCC during the year.
Total projects awarded in Kuwait during 2022 reached $2.8 billion as against $5.2 billion in 2021.
Similarly, Oman witnessed new projects awards drop of 27.1% y-o-y to reach $2.2 billion while the aggregate value of contracts awarded in Bahrain reached $996 million in 2022 as compared to $2.7 billion during 2021.
In terms of sector classification, the construction sector witnessed the biggest increase in the value of projects awarded during the year recording $3.2 billion y-o-y increase in new contract awards to reach a total of $34.3 billion during 2022.
The growth in the GCC construction sector was mainly driven by the jump in total value of contracts awards in Saudi Arabia’s construction sector.
The Saudi construction sector comprised 59.2% of the total value of projects awarded in the construction sector in the GCC during the year.