Saudi construction to shrink by 0.7% this year

The Grand Mosque, amid construction work taking place across the the Saudi city of Makkah. (Getty Images)

Saudi Arabia’s construction industry is forecast to contract by 0.7%, down to US$19.38 billion (SR72.57 billion) this year, according to independent data reported yesterday.

Figures from the Business Monitor International (BMI) of the Kingdom’s infrastructure value between 2003 and 2013 estimate that last year the real industry value contracted by 0.2% year on year – putting an end to positive growth.

Positive growth would not return until 2013, the report said, which it said was a direct result of the global economic slowdown, according to the Saudi Gazette.

“In fact, we do not see positive growth returning until 2013, when it will expand at a rate of 3.7% year-on-year. The global slowdown has impacted the construction sector in all the Gulf Cooperation Council (GCC) states, and Saudi Arabia will not be immune,” it said.

High inflation in Saudi Arabia forecast to hit eight percent this year, was an exacerbating problem, the report said.

“As such, although there will continue to be activity in the industry, and the nominal value will increase year-on-year, this will be negated by inflation, pushing growth rates negative.”

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However, there were some positive indictors too, with construction drying up in other parts of the GCC, most importantly Dubai, a number of developers had set their sights on Saudi as the country to support them, BMI pointed out.

Increased government spending to help cushion the country from the global economic downturn, and declining oil revenues, would go to boost most infrastructure and construction industries, it added.

“With infrastructure set to benefit form a portion of this spending, it does present an upside risk to our construction industry value forecasts,” the report concluded.

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