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Saudi construction industry growth hits 7% in 2010

BMI predicts strong growth in construction sector over next four years

Construction in Saudi Arabia looks set for a strong period of growth. File picture. Image: Khaled Desouki, Getty.
Construction in Saudi Arabia looks set for a strong period of growth. File picture. Image: Khaled Desouki, Getty.

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Saudi Arabia's construction industry, one of the largest in the Middle East, will continue to present opportunities to investors over the next four years as infrastructure continues to be central to the government's expenditure plans, a new report has said.

Business Monitor International is forecasting nearly seven percent growth in the kingdom's construction sector in 2010, fuelled by billions of dollars of projects either in the pipeline or currently under way.

According to BMI's Key Projects Database, $80bn worth of infrastructure projects are currently under way in the county.

Based on the number of ongoing projects, BMI analysts said they are optimistic for the medium term outlook for Saudi Arabia, with average real growth of 4.13 percent forecast per year between 2010 and 2014.

"Although not exactly booming, considering the size of the industry, it is strong growth," the report said.

Industry value is forecast to rise from SR92.2bn ($24.57bn) to SR122.48bn ($37.70bn) over the same time period, BMI's report added.

"This is couched in strong fundamentals for continued demand for construction projects, from housing to transport," said BMI.

"Saudi Arabia's strong native population is a key factor behind the stable and growing demand for infrastructure in the country. Another integral element is the government's commitment to infrastructure investment and its ability to support these plans with funding," it added.

BMI analysts said that with the capital to back up projects running into the billions, planned infrastructure projects are likely to be pushed through even if private financing is unavailable.
The report added that Saudi Arabia's construction sector grew by 4.71 percent in 2009, citing data from the Saudi Arabian Monetary Agency, coming in above BMI's estimates for the country.

"This strong growth in the face of difficult access to credit and a global recession illustrates just how resistant the Saudi Arabian construction industry is," the report said.

"Compared to many other countries in the region which rely of demand from expatriates or the tourism sector. Saudi Arabia's infrastructure projects are in response to actual, sustainable demand from a native population."

It said housing would be one of the strongest sectors going forward, as the government plans to invest heavily in affordable housing to meet a substantial shortfall in units.
Continued investment in the utilities sector is also on the cards, according to BMI, as the country's growing demand for electricity, as well as an inefficient use of electricity, has led to an increasing number of power cuts during peak times.

The Saudi Electricity Company is planning to invest $80bn in the sector to 2018 to address this, an earlier report by BMI said.

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