Outlook 2017: Richard Marshall, Analyst, BMI Research
Overall we anticipate that 2016 was the bottom in terms of growth in GCC construction markets. The year saw that initial expectations that the wealthy GCC markets could sustain their infrastructure project pipelines during a sustained period of lower oil prices was untrue and planned projects began a period of rationalisation.
There has been pain in some markets notably Saudi Arabia, which we forecast went into recession over 2016 but 2016 also saw markets begin a fundamental transformation which should set them on the path of more sustainable growth as they look to increasingly tap the private sector.
That said, 2017 will still be challenging as markets are not yet attractive enough
to generally attract massive infrastructure investment and governments remain very selective in which projects they finance. There will be a heavy focus on cost efficiency and margins at construction firms will be under even more pressure than ever.
To find the best opportunities, firms should look to those projects which are key for economic diversification. For example, freight rail projects connecting to ports over long distance passenger rail.
In particular though, we highlight the industrial construction sector in 2017, as we expect GCC countries will seek to move further downstream into the petrochemical sector to capitalise on growing demand for plastics at a time when excess refining capacity combined with tepid demand for refined fuels weighs on margins in the refining industry.
While each GCC country will view expansion in the petrochemicals space as a means to accelerate economic diversification, Saudi Arabia and the United Arab Emirates in particular announced ambitious growth targets.