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Qatar and Saudi Arabia poles apart on construction growth

Since the construction of World Cup projects such as the Khalifa stadium, levels have dropped off in Qatar, while neighour Saudi Arabia is growing at pace Reuters/Naseem Mohammed Bny Huthil
Construction projects in Qatar have nosedived since work on buildings for the World Cup, such as the Khalifa International Stadium, were completed
  • Saudi Arabia construction monitor hits +69
  • Qatar slumps after World Cup to -33
  • Expectations remain in negative territory

Qatar and Saudi Arabia may share an 87km border, but the performances of their construction markets are poles apart.

While activity in Saudi Arabia reaches record levels, buoyed by work on giga-projects such as Neom and Diriyah, work in Qatar has dried up after the completion of contracts signed before the 2022 Fifa World Cup.

The latest Global Construction Monitor, released by the Royal Institute of Chartered Surveyors (Rics), gave Saudi Arabia a score of +69 on its activity index for the third quarter of 2023, against -33 for Qatar.

The kingdom led growth in the wider Middle East and Africa region – which indicated a solid construction sector backdrop with a score of +34 – the strongest reading since the index was first unveiled in early 2020.

Tarrant Parsons, a senior economist at Rics, tells AGBI that activity stalled further in Qatar in Q3 as output has fallen in the aftermath of the Fifa World Cup.

Both countries saw a Covid slump, but Saudi Arabia has since roared away

“All sectors, private residential, private commercial and infrastructure, saw another sharp quarterly fall in workloads over the latest survey period,” he says.

Parsons says 12-month expectations in Qatar remain in negative territory across both the private residential and non-residential sectors, although the outlook appears to be “slightly positive” for infrastructure. 

Financial constraints were cited by 84 percent of construction executives surveyed as being a barrier to market activity in Qatar, while three-quarters said insufficient demand was responsible for subdued activity. 

In contrast, Saudi Arabia equalled its strongest performance on record in Q3 – also a world-leading position – “with no sign of the recent strong momentum easing,” Parsons says.

Infrastructure continues to expand at the the sharpest pace, he says, with the transport, social and energy sub-sectors not far behind.

Private residential and non-residential segments also remained on an upward trajectory, as did new business enquiries.

Construction firms operating in the kingdom also foresee strong expansion in workloads across each sector in the next 12 months, and employment levels are set to rise. 

Person, Worker, HelmetPexels
Expectations in Qatar remain negative in both the private residential and non-residential sectors
Skills shortages

However, skills shortages are seen as a significant barrier. They were cited by 70 percent of companies, compared with 49 percent across the wider Middle East and Africa region, as Saudi Arabia struggles to find enough talent to complete a an array of projects.

The kingdom has signed off on $78 billion of construction projects so far this year, according the Saudi Contractors Authority, which put the total value of ongoing projects as of the end of October at nearly $1.5 trillion. 

Meanwhile, Rics says activity in the UAE construction market remained strong in Q3, with a score of +45.

“The latest feedback points to strong growth in workloads across all sectors, with private residential development and infrastructure projects picking up at an especially strong pace,” says Parsons.

New business enquiries during Q3 were also healthy, while expectations are firmly positive for construction workloads over the next 12 months.

The most widely cited factors seen to be impeding the UAE construction market were material costs, financial constraints and skills shortages, Rics says. 

In Bahrain, activity grew in Q3 but at a more sedate pace (+10) compared with the previous quarter (+39), held back by a subdued private commercial sector. 

Adult, Female, PersonPexels
A lack of skills of all sorts is holding back growth in the construction sector in Saudi Arabia

New business enquiries showed a similar slowdown compared with Q2, while expectations for workloads were positive across all sectors. Infrastructure output is expected to see the strongest rise.

“Perhaps reflective of the strong growth in construction activity across other parts of the region, competition is the most widely referenced factor though to be holding back the construction industry at present in Bahrain,” says Parsons.

In Oman, financial constraints and the cost of materials, as well as insufficient demand and competition, are seen as the major impediments over the next 12 months. 

In Q3, activity in the sultanate’s construction market posted a +31 score, down from +45 in Q2 but still consistent with a solid rise in overall output.

“Workloads are anticipated to rise across all sectors over the next 12 months, led by a particularly upbeat assessment on the outlook for infrastructure projects,” Parsons says. 

Regionally, Rics says new business enquiries continued to climb in Q3, with the latest score of +28 representing a record high. 

Despite an overall optimistic tone, more than three quarters of construction companies based in the region cited challenges with respects to material costs and financial constraints. 

How the scores are calculated

The construction activity index is created by taking an average of current and 12-month expectations of four series: residential workloads, non-residential workloads, infrastructure workloads and profit margins.

The net balance score is reached by the proportion of respondents reporting a rise in a variable minus those reporting a drop. Net balance data can range from -100 to +100. A positive net balance reading indicates an overall increase while a negative reading indicates an overall decline.

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