Saudi Arabia's construction industry value is forecast to contract by 0.7 percent, reaching SR72.57 billion ($19.38 billion) in 2009. Based on the data set from 2009 to 2013, BMI's second quarter of 2009 Report on Saudi Arabia Infrastructure issued on Friday, estimated that in 2008 the real industry value contracted by 0.2 percent year-on-year (y-o-y), putting an end to years of positive growth in the industry. “In fact, we do not see positive growth returning until 2013, when it will expand at a rate of 3.7 percent y-o-y. The global slowdown has impacted the construction sector in all the Gulf Cooperation Council (GCC) states, and Saudi Arabia will not be immune,” the report said. Moreover, “the impact on Saudi Arabia is exacerbated by high levels of inflation (8 percent forecast for 2009). As such, although there will continue to be activity in the industry, and the nominal value will increase y-o-y, this will be negated by inflation, pushing growth rates negative.” The key project in the transport sector so far in 2009 has been the awarding of the first contract for the 444km Makkah-Madina railway. The civil works contract, worth an estimated SR6.8 billion ($1.8 billion), was awarded to a consortium formed of Al-Rajhi Construction Group, France's Alstom and Chinas Railway Engineering. The power sector has also seen a great deal of activity in late 2008 and early 2009. This activity is necessary in order to meet the theoretical shortfall in supply which BMI is forecasting to start emerging in 2009, with a gap of 13.8TWh. The largest contract awarded was in December 2008 to a consortium including Korea Electric Power, and Saudi Arabian company ACWA. The $2.5 billion contract is to build, own and operate an oil-fired power plant. The construction sector, however, is beginning to show the first signs of strain. However, there is some hope for the industry, the report pointed out. A number of construction companies currently operating in the Gulf, especially in Dubai, have decided to refocus their attentions on the Saudi Arabian construction industry. Examples include Arabtec and Deyaar Development. With other GCC markets drying up, they are looking to Saudi Arabia to support them through 2009. The report noted that through increased government spending designed to help cushion the country from the global economic downturn, and declining oil revenues, the country will post a fiscal deficit of 4.9 percent, from a surplus of 32.5 percent in 2008. “However, with infrastructure set to benefit form a portion of this spending, it does present an upside risk to our construction industry value forecasts, the report added. __
