GCC looks to ward off crisis through public spending

Public sector spending on construction to increase

GCC governments are planning to combat the effects of the global recession in 2009 through a ramping up of public sector construction spending.

The Saudi Arabian government announced its national budget for 2009 last week, with planned expenditure of US $127 billion (SAR475 billion) at its centre, an increase of $17 billion on its 2008 budget.

But the figure represents a decrease of $9 billion on actual spending for 2008, which reached $136 billion.

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The budgetary increase, marking the largest planned expenditure in the nation’s history, comes despite a predicted fall in revenue for 2009 to $109 billion, a result of tumbling oil prices from last summer’s high of $147 per barrel.

The budget plans for a deficit of $18 billion, and is intended to inject confidence into the faltering private sector, by communicating the public spending initiatives.

“We think this is sensible given that lower project costs and raw material prices make the investment plans more affordable,” Riyadh-based Jadwa Investments said in a special budget report.

“It also sends an important signal to investors about the underlying health of the economy and the strength of government finances and should lift confidence.”

Similar plans for increased spending were announced in Dubai. The government plans to increase public expenditure by 20% in 2009, Dubai Department of Finance director general Nasser Al Sheikh told a national newspaper.

“The role of government is to increase spending during challenging times and provide a stimulus to the economy,” he said.

“There will be an increase in spending on infrastructure projects, including completion of the Metro project, expansion of the airport and construction of a new airport.”

Public projects are also set to press on in Qatar. State-owned Qatar Steel marketing manager Mohammed Al Saadi told Construction Week, “The government has already secured the funding for its planned infrastructure projects.”

Public spending on infrastructure is seen by economists as a means of stimulating faltering economies. US president-elect Barrack Obama unveiled his $700 billion bail-out plan for the US economy last month, with a public construction package covering road and bridge building at the centre.