Friday 22 October 2021

GCC economic project awards down but above crisis levels

DUBAI, June 3, 2016

Awards of major economic projects in Gulf oil-exporting states have dropped this year but remain above levels seen during the global financial crisis of 2008-2009, Abu Dhabi Commercial Bank (ADCB) said in a report released on Thursday.

Governments and state-linked companies in the six-nation Gulf Cooperation Council region are restraining spending and delaying projects as low oil prices slash their revenues.

The total value of GCC project awards dropped 14.8 per cent from the previous quarter and 45.6 per cent from a year earlier in the first quarter of 2016, to the lowest level since the third quarter of 2012, ADCB said, citing figures from data provider MEED and its own research.

However, the value of awards - for projects including oil and gas installations, industrial plant and residential housing - was still higher than between the third quarter of 2008 and the third quarter of 2009.

"We believe this partly reflects the fact that foreign funding remains accessible, unlike during the global financial crisis when it was largely cut off," ADCB said.

There were big differences between countries. In Saudi Arabia, which is grappling with a huge state budget deficit, awards shrank 42.9 per cent from the previous quarter and 49.2 per cent from a year earlier.

"We see Saudi Arabia as being the most at risk for further cancellations in 2016," ADCB said. "The fiscal position remains tight despite the rise in the oil price since Q1 and we do not see signs of a pick-up in tendering activity."

However, the value of project awards in the United Arab Emirates, which has a more diversified economy and stronger state finances than Saudi Arabia, rose 15.1 per cent from the previous quarter. Both Abu Dhabi and Dubai saw increases.

Awards fell steeply in Qatar, down 45.7 per cent quarter-on-quarter and 89.3 per cent year-on-year. "Projects are being re-evaluated, with only the most critical being awarded," ADCB said.

But project awards in Kuwait, Oman and Bahrain were strong during the first quarter, ADCB said. Pressure on Kuwaiti finances is relatively light, while ADCB said Oman, which faces heavy pressure, was able to use private-public partnerships to attract foreign funding for its projects.-Reuters

Tags: GCC | Crisis |

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