Before the start of the Covid-19 pandemic, the Middle East was one of the fastest developing regions in the world. Today, the region not only faces a significant economic effect as a result of the disease, but also faces a very serious situation. The best typhoon of headwinds that come with a weak oil market and shrinking non-oil sectors.
“The value of oil is the most important thing and Covid-19 is what affects the market at the moment,” says Gathrough Rhayem, Regional Director for the Middle East and Africa at Doosan Bobcat EMEA. “The regional economy is driven through oil. Oil prices less than $50 consistent with the barrel, which means there are no new projects, no investments and projects reduced just to make sure they are completed.
To illustrate these problems, the knowledge and analysis company GlobalData cut its forecast for the expansion of structure production by 2020 for the Middle East and North Africa (MENA) region to -2. 4%, below its previous forecast of 1. 4%.
“Construction activity during the rest of 2020 is expected to develop poorly,” said Yasmine Ghozzi, GlobalData economist.
“Although the activity of the structure is sometimes low during the holy month of Ramadaan and the hot summer months of June, July and August, this is sometimes offset by intelligent functionality at the beginning and end of the year. This will not be the case this year due to strict blocking policies that have been extended until the end of May. “
Going forward, the sector is expected to slowly decline in 2021, although the speed will be asymmetrical among countries in the region.
“Budget deficits and public debt degrees will be particularly high in 2021,” Ghozzi continues. “Fiscal consolidation will hamper non-oil expansion in the region, where governments still play a significant role in stimulating domestic demand. “
In addition, public investment is expected to be moderate at best, resulting in a reduction in expansion clients for companies in the sector, such as infrastructure.
Escalating fights for the UAE
Even without the outbreak of the Covid-19 pandemic, the structures sector in the United Arab Emirates had struggled due to allocation delays and charge overruns, to mention a tepid adoption of the technology. These demanding situations are now exacerbated by the effects of the coronavirus. on the country’s labor force.
The headquarters of the foreign city of Dubai, the government of the United Arab Emirates classified the structure as a critical mastery of paintings at the beginning of the pandemic, however, many projects had to be suspended or even cancelled due to preventive measures designed for painters.
According to a report through MEED Middle East Business Intelligence, the United Arab Emirates introduced a national disinfection crusade on March 26, with strict curfews.
The structures industry in the United Arab Emirates was one of the few sectors that were exempt from the blockade of the national sterilization campaign. Allocation sites remained active, although operations were not saved from disruptions caused by the virus, with some Middle Eastern countries still blocked in whole or in part.
“Before the genuine effect of Covid-19 was felt, we were already in a structure sector under great pressure due to a lack of liquidity in the system,” said Sean McQue, structure manager at Emirati contractor Alec. MEED.
“Companies were unable to execute and deliver because they faced significant inherited disorders due to the non-payment of the paintings they had already made. The effects of Covid-19 have exacerbated this problem. “
The culture of bidding at unrealistic costs to gain paints leaves little room to face unforeseen demanding situations in all areas, McQue says. Contractors are now suffering from execution costs and costs.
The economic downturn puts more pressure on monetary resources, adding public spending on primary infrastructure projects, which has led to increased pressure on bills and money flows.
Given what is already a shrinking market, Covid-19’s existing scenario, as well as falling oil prices, result in a low point of new allocation opportunities for designers and entrepreneurs, most likely leading to a relief in paint volumes. . in the next 12 to 24 months,” said Jason Sams, director of the structure department of Khansaheb, a contractor based in the United Arab Emirates, as cited in the MEED report.
“The low-market pricing strategy puts pressure on key elements of the chain of origin, causing instability and lack of reliability, financial, resources and external purchases. “
According to GlobalData’s Covid-19 Sector Impact study, the structure sector of the United Arab Emirates grew by 3. 3% in real terms in 2019 and is expected to grow by 4. 3% in 2020, driven by initiatives. In oil prices, the company now expects the production of structures to contract by 1. 9% in 2020 with a recovery of 3. 8% in 2021.
The McKinsey Global Institute, founded in the United States, makes a prediction: “If things go well, the activity of the structure can return to pre-crisis levels in early 2021,” says Ghassan Ziadat, vice president of primary projects at McKinsey.
Giga-Saudi Projects
The Government of the Kingdom of Saudi Arabia has established a 24-hour curfew from 23 March 2020 to prevent the spread of Covid-19, and only physical care personnel or critical sectors can leave their homes at certain times.
Construction was not in thought of as a critical sector and, some permits were issued to allow the continuation of essential projects, the structure projects were largely suspended.
“Projects have been cancelled or pending,” says Doosan Bobcat’s Rhayem. “Many investments are deferred or kept to a minimum. We are seeing a sharp decline in machinery as a result of assignment cancellations. “
Unsurprisingly, GlobalData has cut its forecast for structural production expansion in Saudi Arabia to -1. 8% since its previous forecast of 2. 9% in 2020, but expects a recovery of approximately 3. 3% in 2021.
Earlier this year, a series of government-backed “gigaprojects” were in a position to enter its structure phase. These included the $500 billion Neom Future City Project and a number of tourism developments.
These projects were coupled with a number of primary government infrastructure projects, adding roads, airports and railways, which were in a position to begin construction.
The implementation of these projects was called into question when the Organization of Petroleum Exporting Countries (OPEC) and its non-OPEC allies failed to reach agreement on oil production cuts, as the overall call for oil production weakened due to measures to involve the spread. virus.
However, it recently reported that the Red Sea Development Company (TRSDC) of Saudi Arabia is preparing to award another RS 3. 5 billion ($933 million) in contracts for its tourism allocation in the Red Sea until the end of the year.
“Gulf structure corporations are eagerly awaiting the next generation of Saudi projects to enter the structure since its launch in 2017,” notes MEED’s Colin Foreman.
“In the following years, as these assignment delivery groups prepared master plans and designs and appointed consultants, contractors who were desperate for new paints were frustrated by the lack of progress on the site. The large assignments planned through master’s degrees are a marathon and a sprint.
TRSDC has already awarded approximately $1. 25 billion in paintings in its allocation to date, and until the end of this year attempts to award $1 billion in contracts, reportedly.
Children in the Middle East face challenges
Small countries in the Middle East have not escaped the havoc of demanding situations they faced through their older brothers.
“GlobalData reduced expansion rates in Qatar, Kuwait and Oman in 2020 to -3. 4%, -7. 8%, and -8. 1%, respectively,” Ghozzi says. “Qatar’s economy will be affected this year by declining tourist arrivals, low customer spending and low oil prices. However, strong fiscal stimulus and spending on infrastructure projects provide support.
“The negative outlook for Kuwait is affected by lower oil costs and the prospect of a higher budget deficit, which can jeopardize government capital expenditure on structure and infrastructure,” he added.
“Indeterminacy is an impediment to reforms in the Kuwaiti economy; extensions of bidding deadlines, coupled with a rigorous bureaucratic procurement configuration that slows decision-making, will slow the progress of several Kuwaiti megaprojects. “
Meanwhile, Iran’s structure industry has grim prospects. A slowdown in economic activity caused by the pandemic and a imaginable wave of new U. S. sanctions (should Trump gain a period of time) recommend a drastic effect on structural activity and a negative effect on the economy.
It is to be expected the long-term effect that existing cases will have on structure in the Middle East. Since many governments in the region indicate their preference to continue planned projects, not only to meet the commitments already made, but also to provide mandatory stimulus to the economy as a whole, the way those projects are carried out is likely to be very distant. the way they had been conceptualized.
Forecasters for the region expect structure prices to fall on any new allocation that begins in the near term, given existing restrictions and social distancing measures that are expected to continue for the foreseeable future, yet it is hard to see how. prices are calculated. in relation to productivity in the classical way of doing business may fall under the existing circumstances.
Two of Abu Dhabi’s contractors, National Petroleum Construction (NPCC) and National Marine Dredging (NMDC), are believed to be
considering a merger.
According to the proposal, The Senaat – NPCC’s largest consequential shareholder – and another consequential minority of NPCC shareholders would move the entire factor of the company based on percentage capital to NMDC. In return, NMDC would factor for Senaat and other holders of percentages consisting of an arrangement convertible to 575,000,000, which is not unusual consistent with the percentages of the combined organization at close, valued at $1. 19 consistent with the consistent percentage.
The new entity will be one of the largest oil, fuel and marine corporations in the Middle East, with combined revenues of approximately US$2. 4 billion.
The agreement could be concluded until the end of this year, the subject of regulatory approvals.
Dubai Expo 2020 in the United Arab Emirates has been postponed for one year due to the effect of Covid-19 and is now expected to take place between 1 October 2021 and 31 March 2022.
The event, which hoped to attract some 25 million visitors, 70% of whom arrived from outside the United Arab Emirates, originally scheduled to begin on October 20, 2020.
This global occasion is a 2021 UAE Vision 2021 birthday party through support for tourism expansion, the progression of cutting-edge businesses in the UAE and improving the country’s foreign reputation as a business position.
There would be more than two hundred participants, with nations, multilateral agencies, businesses and educational institutions, according to the organizers, and some 192 countries had shown their participation.
Deferral is expected to have a significant effect on the UAE economy and staff involved in a wide range of fair-related projects. So far, the Expo’s structure prices have been estimated at around US$7 billion.
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