The Saudi construction market is showing signs of growth following a slowdown caused by low oil prices and fiscal spending cuts, according to a report.
The report, produced by BNC Network in partnership with the The Big 5 conference, said the country has more than 4,700 active construction projects with a combined estimated value of $852.3bn.
BNC said Saudi’s economy was one of the most dependent on oil, which accounts for more than 50% of national GDP and 90% of export earnings. The report said construction had been “subdued” since the end of 2014 due to declining energy prices and the imposition of austerity measures to curb a large budget deficit.
“The slowdown in construction demand resulted in lower operating margins and squeezed profits for many builders,” said the report.
“Bank lending policies became restrictive which limited access to capital and payment durations reached an average of 120 to 180 days. The net effect was a lowering of working capital and cash flow positions of many companies.”
Notable projects under way include the Oil-to-Chemicals Complex in Yanbu, worth $30bn, and Al Faisaliah city in Makkah, worth $25bn. There are around 170 active projects worth $1bn or more, constituting approximately 70% of the value of all schemes.
The report said many projects were part of Saudi Vision 2030, the long-term oil plan to diversify the economy away from oil.
“A significant component of Saudi Vision 2030 includes an overarching plan to modernise and build up the country’s roads, infrastructure and logistics routes, and is enabling the construction of many new transport projects,” said the report. “The combined estimated value of these projects, which are spread across different industries including road, rail, marine, and aviation, constitutes approximately 20% of all project values in the country.”
The report added: “The Saudi construction market has tremendous growth potential over the next few years, particularly in the urban construction sector. The steady rise in the Saudi population, along with growing urbanisation trends, is fuelling the construction of new residential and commercial properties, while ambitious plans to move the economy beyond oil are driving construction activities in non-residential segments.”
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