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Fitch Ratings, the international ratings agency, expects the MENA construction sector to continue to be supported by government spending in 2012, given the massive infrastructure plans in place.
Saudi Arabia, Qatar and Abu Dhabi will lead government spending for the year, while the Dubai construction market will remain fragile in the medium term.
The latest report by Fitch highlights the key factors in assessing the construction outlook at the country level as being government fiscal flexibility and the extent of historical infrastructure spending.
“In Saudi Arabia and Qatar, infrastructure spending continues to be strong, but with lower margins. During the construction boom, MENA region contractor margins have remained higher than international peers,” said Bashar Al Natoor, director in Fitch’s EMEA corporate team in Dubai.
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“However, with the recently increasing competition, contractors have started to go for lower margins, and Fitch expects this to remain the case over the next few years,” added Al Natoor.
The ratings agency also noted that Abu Dhabi has cut down on its spending for construction-related projects, due to the concern about oversupply in the real-estate market and the increase in the UAE capital’s financial commitments.
The general slowdown in the global economy has also played a part, the report added.
Despite some contracts being delayed or possibly cancelled, there remains a number of key projects in the pipeline, with the Abu Dhabi government prioritising major infrastructure projects.
However, the agency warned that the sharper than anticipated slowdown could have some implications for contractors operating in the UAE.
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