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S&P: GCC project funds for 2019 short by $270bn

The GCC will spend $330bn on projects between 2016 and 2019, whereas Standard & Poor's estimates funding requirements worth $604bn for the same period

Transport projects are expected to comprise a large part of GCC's infrastructure investments by 2019. [Representational image]
Transport projects are expected to comprise a large part of GCC's infrastructure investments by 2019. [Representational image]

Standard & Poor's (S&P) has warned Gulf countries and banks they may find themselves equipped with diminished resources to support their infrastructure plans over the upcoming years. 

S&P's Ratings Services estimates that GCC's overall capital spending over the next four years will be $480bn. 

Government spending on projects, including infrastructure contracts awarded between 2016 and 2019, will be $330bn. 

S&P's estimate for required overall funding through to 2019 is $604bn, of which $100bn will be needed for infrastructure projects. 

Currently, only $50bn of the total $330bn is estimated to be allocated for infrastructure projects, including transport developments. 

The difference between S&P's estimates of capital spending on projects, and project contracts awarded, is $270bn through to 2019. 

S&P's credit analyst, Karim Nassif, remarked on these figures in the agency's recently released report, titled 'To Pay For Its Big Infrastructure Bill, The Gulf May Have To Look At Innovative Forms Of Finance'.

"This is one reason why Gulf countries are starting to look at alternatives such as public-private partnerships," Nassif said. 

S&P said it believes GCC governments are "protecting capital spending" as a share of overall expenditure to support growth and further their diversification strategies. 

Furthermore, these countries are cutting costs where "they can afford to, or for what we consider to be nonessential infrastructure spending".

The report continued: "Saudi Arabia, for example, reduced its 2016 transport and infrastructure budget by 63% from the previous year.

"This for us illustrates the challenge Gulf countries will face to pay for infrastructure through traditional sources, including government funding," it added. 

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Construction Week - Issue 745
Jun 30, 2019