This year will bring an uptick in MENA construction activity and costs, fuelling a rise in tender cost prices, according to new analysis.
The latest tender cost update from global consultancy Mace shows that that – although the region’s construction market is still reeling from a two year contraction in project spending – a fuller pipeline for 2018 is providing optimism in the region as economic reforms and fiscal consolidation start to pay off.
As oil prices and consequently budgets recover from the slowdown across the region and activity picks up, there is a general recovery in tender prices, the report says.
This steady recovery is set to continue in Saudi Arabia, picking up to 2.79% growth in 2018 from 2.54%, reflecting the launch of many new projects to market and hence increased competition for suppliers.
Saudi Arabia is set to see strongest growth in tender prices of the countries considered, followed by Oman, which has seen a significant jump to 2.46% growth in 2018.
The wider picture is far from entirely positive, as financing remains a challenge and an increased reliance on private sector funding is likely to be a permanent change across the region. Material costs are also increasing as cash-strapped countries use the introduction of VAT to recover some of their income.
Fergus Rossiter, Mace’s Director of Mace Cost Consultancy for MENA, said: “Increased project activity is anticipated to drive up tender prices across MENA markets, as contractors see their order books fill up again after the recent slowdown.
“However, the new economic reality means bringing financing to the table is becoming increasingly important, as contractors compete for diminishing government funding.”