Four-year Mena projects market dip continues

With some $4.7tn of projects planned or under way, the Middle East and North Africa (Mena) projects market looks in robust shape at the end of 2019.

The value of the region’s projects market is equivalent to 149 per cent of the $3.1tn combined GDP of the 17 states that make up the Mena market.

It also represents a solid 1.5 per cent year-on-year increase in the size of the Mena projects market since December 2018.

But you do not need to dig far below the surface to discover that the market has had anything but a good year in 2019.

While the total value of known projects has risen, the value of projects in execution has fallen sharply in 2019.

Projects in execution

According to MEED’s projects database MEED Projects, about $830bn of projects were under execution across the region at the end of 2019, down 16 per cent on the $987.7bn of projects in execution at the end of 2018.

Benchmarked against GDP, the value of projects in execution in the Mena region at the end of 2019 was the equivalent of about 27 per cent of GDP, down from 32 per cent of GDP at the end of 2018.

The GCC, which saw a 16 per cent slump in the value of projects under way in 2019, was responsible for the lion’s share of the decline. But a 38 per cent contraction in the value of projects under way in Iran, representing a year-on-year drop in value of about $52bn, was also significant.

The region’s biggest projects market, Saudi Arabia, had an 18 per cent decline in the value of projects under execution in 2019 with the value of projects under execution falling to about $186.4bn at the end of 2019.

Pipeline of planned projects in the Mena region

With some $2.3tn of projects planned across the Mena region but as yet unawarded, there is no doubting the potential of the region to produce an abundant supply of new project opportunities, particularly in the GCC, which accounts for about 67 per cent of all of the projects planned across the region.

Saudi Arabia has the biggest pipeline of planned projects, with about $858bn of projects planned but not yet awarded.

These include a series of huge megaprojects being developed by the Public Investment Fund (PIF) including the $500bn Neom future city project and the estimated $8.5bn Red Sea project. It is important to note, however, that much of the investment in these government-backed projects is expected to come from private sector developers and that the actual value of project spending is thereby uncertain.

Projects in the Mena region that will drive new business in 2020

According to MEED Projects, at the end of 2019, some $292bn-worth of projects across the Mena region had entered their procurement stages, suggesting a strong pick up in awards in 2020.

This is unlikely however.

With oil prices set to remain low and government spending controls in place, there is unlikely to be any large-scale, region-wide rebound in the projects market in 2020.

Uncertainty surrounding the trade war between the US and China and a slowdown in the EU economy are contributing to a slowdown in global economic growth and limiting growth in energy demand. As a consequence, oil prices are expected to average about $61 a barrel in 2020 and 2021, similar to levels in 2019.

In addition to PIF’s construction megaprojects in Saudi Arabia, the energy sector offers the biggest potential for new project opportunities in 2020 with about $66bn of oil and gas projects being tendered at the end of 2019, and about $64bn of power and water projects.

With about $20.4bn and $12.7bn of projects respectively being tendered, the UAE and Saudi oil and gas sectors offer the biggest pipeline of imminent project activity in 2020.

In addition to this, some $19.3bn of power and water projects are being tendered in Saudi Arabia.

While the GCC will provide the biggest project opportunities with Saudi Arabia and the UAE at the forefront, Egypt’s economic development programme also offers good potential, with about $15bn of projects in tendering in December 2019.

With about $56.5bn of projects at some stage of procurement, the construction sector has the biggest pipeline of imminent new project opportunities.

But it is also the industry facing the most volatility, particularly in the UAE, where an oversupply in the property sector is likely to cause many speculative property developments to be delayed.