Will 2017 be a happy new year for construction?
From improving oil prices to increasing non-oil activity, there are reasons to be cheerful in 2017 despite looming concerns over reduced cash flow and structural reforms
Let me begin by wishing you a very Happy New Year. 2017 is a year we have all been looking forward to after enduring the economic hardships of 2016. Lacklustre crude oil prices pushed the regional construction industry into a slump, news about construction workers living in squalid conditions in Qatar dealt a severe blow to the sector’s reputation, and project uncertainty persisted – it will be hard to remember last year fondly.
However, one positive development that can be taken away from 2016 is the concerted effort of GCC member states to reduce their economies’ dependence on oil and gas revenues. Regional governments are now aggressively pursuing economic diversification programmes, and therefore capitalising on other revenue-generating sectors. Evidence of this shift include investment in tourism, the announcement of large-scale real estate and infrastructure projects, and the revision of state spending.
But the new year has commenced on an optimistic note for the construction industry, as oil prices – on which the sector is and will continue to remain largely dependent – appear to be on a path to recovery, regularly trading above the $55-per-barrel mark.
In November, the UAE announced a target economic growth rate of 4% for 2017, up from 3.8% in 2016, as it looks to the non-oil sector for expansion. “Our aim is to maintain the same level of growth [in 2017] and that will be around 4%,” Abdullah Al Saleh, the undersecretary of the Ministry of Economy, said at the UAE Economic Planning Forum.
The International Monetary Fund (IMF) has predicted significant gross domestic product (GDP) growth for Saudi Arabia, which is expected to accelerate to 2% in 2017 from 1.2% in 2016. Aided by the government’s fundamental policy shift to recalibrate the economy to respond to low oil prices, the world’s largest oil producer and exporter introduced a series of reforms, and has set out plans for an ambitious transformation of the Saudi Arabian economy in Vision 2030.
Not to be left behind, the rapidly changing landscape of Qatar has led economists to predict the GDP will accelerate to 3.8% in 2017 from 3.2% in 2016, and up to 4.1% in 2018, with the ramp-up in investment spending, infrastructure building, and initial gas production from the Barzan project.
With further austerity, the removal of subsidies, and the channelling of funds into projects likely to cement a non-oil future, Oman’s GDP is projected to experience a growth of 2%, while non-oil activities are expected to rise by 4.7% in 2017. Meanwhile, on the back of non-oil activity, Bahrain and Kuwait have predicted economic growth rates of 3.4% and 3.5%, respectively.
And with mega-events on the horizon, such as Expo 2020 in Dubai and the 2022 FIFA World Cup in Qatar, there is ample reason for members of the construction industry – and others – to feel optimistic.
Of course, nothing is set in stone but, in years to come, we may well look back on 2017 as the year in which the green shoots of recovery began to sprout in the GCC’s construction industry.