Projects planned and underway in the GCC in 2015 are valued at $172 billion, the highest yearly total on record to date, according to a new report by Deloitte.
Its new study said that the Gulf’s construction market will be another key indicator of economic development this year as the GCC continues to invest in infrastructure and capital projects.
According to Deloitte, out of the total $2.8 trillion projects which are in execution and pre execution phases, 40 percent of this value relates to residential, leisure and hospitality buildings and mixed-use developments, totaling an anticipated budget value of $1.1 trillion.
“These projects are the most sensitive in terms of balancing supply and demand in each of the GCC countries, with timing of delivery balanced alongside a sensible return on investment likely impacting the awards of these projects specifically,” said Deloitte.
“What seems clear is that the necessity to move away from oil-based economies has never been greater and that in the race to diversify, there will be winners and runners-up. Quite how this will play out is too early to say, but the gap is likely to grow, providing a regional hotspot of investment and development,” said Andrew Jeffery, managing director, Capital Projects Advisory, Deloitte Middle East.
According to the Deloitte report, key drivers for diversification include job creation given that 50 percent of the GCC population is under the age of 25.
In Saudi Arabia alone it is forecast that four million jobs will be needed in the next five years.
Deloitte said GCC population growth is forecast to grow from 350 million to 602 million by 2050, all driving the GCC countries’ strategies to provide education, healthcare, infrastructure and support to communities.
This growth will require energy and water – a 34 percent increase in electricity generation capacity and a further 2.2 billion litres desalination capacity are required by 2020.
“The forecast of $172 billion worth of projects are against a backdrop of lower oil prices, continuing political unrest and reduced International Monetary Fund (IMF) growth forecasts across the GCC,” said Cynthia Corby, audit partner and leader of the construction industry for the Middle East.
“However the GCC countries have the benefit of reserves, which they have built up as a buffer and which they can continue to use to achieve their outlined strategies. Therefore, they are expected to continue to spend on infrastructure and capital projects in order to achieve their strategies for diversification of their economies,” she added.
Key construction projects in the region, according to Deloitte, include the $32 billion Al Maktoum International Airport expansion and the $15 billion Al Mozaini – Riyadh East Sub Centre while rail projects in Qatar are also budgeted at $15 billion. Arabian Business