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Low oil prices prompt a rethink over construction plans
in the GCC.

GCC rethink construction plans over cheap oil

DUBAI, May 11, 2015

The construction outlook in the GCC is increasingly uncertain as governments review their capital spending plans against the backdrop of lower oil prices, said the organisers of an upcoming summit in Dubai, UAE.

The implications of these reviews will be the central theme of discussions at the annual Meed Construction Leadership Summit on May 27 at The Address Dubai Marina.

“The construction market in 2015 is beset with mixed signals,” said Meed News editor Colin Foreman.

“There is a negative backdrop of lower oil prices, a cooling property market and conflict on the GCC’s borders. But, so far there has been no evidence of projects being cancelled, and while some schemes in the planning stages may have slowed, many clients are still pushing ahead and tendering new work.

“That said, if the macroeconomic backdrop remains a concern for the rest of 2015 and into 2016, then spending will start to be reduced and tendering activity will slow,” he added.

While governments across the region remain committed to delivering massive investment programmes to develop the region’s infrastructure, the change in economic landscape is forcing them to focus on their strategic priorities.

And, as a result, creating uncertainty for the construction industry, Foreman highlighted.

Meed’s projects database Meed Projects  figures show about $172 billion worth of project contracts are scheduled to be awarded in 2015, the highest ever with the market being driven by government investment in major infrastructure schemes.

“Construction work on the region’s largest projects such as Abu Dhabi International Airport and the Riyadh and Doha metros is continuing as planned, and for future work new contracts are still being tendered, notably in Dubai,” said Foreman.

“Government and government-related clients have a mandate to develop new infrastructure and for the most part have the financial reserves to proceed with their capital spending plans despite the somewhat negative economic backdrop.

“As ever, the primary challenge for construction companies in the region is securing work, getting paid and making a healthy margin.

“For the rest of 2015, securing new work will become an issue if the economic outlook remains subdued. If that trend continues into 2016 then cash flow and payments could start to become an issue,” Foreman concluded. – TradeArabia News Service




Tags: Meed | GCC | oil price | construction projects |

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