Construction output ‘could see 2.1pc growth in 2021’
MANAMA: Bahrain’s construction output is seen rebounding next year with growth of 2.1 per cent in 2021, following a 1.9pc contraction this year, according to analytics company GlobalData.
The firm’s economist Yasmine Ghozzi told the GDN exclusively that the kingdom’s construction sector can expect a boost from new deals as ties are normalised with Israel.
“A month after the UAE-Israel pact announced in August, Bahrain announced it is normalising ties with Israel, so we expect to see deals happening though no publicly acknowledged business arrangements have been made yet.
“As the pandemic and lockdown measures wreak havoc on the economy, it will be keen to find ways to give its economy a boost from a fresh source and this could be translated into new deals in the kingdom’s construction sector,” she said.
Impact
Coming amidst signs that the Covid-19 lockdowns and other restrictions had a more severe impact on construction activity in Bahrain and the wider region than previous expected, the potential entry of Israeli investment could provide much-needed impetus to the country.
“For 2020/21, most infrastructure projects in Bahrain are delayed, including a new airport terminal (due to open by the end of 2020 but that is not likely to happen), and an import terminal for LNG, as the authorities prioritise current expenditure over capital expenditure,” said Ms Ghozzi.
However, there is good news in that the government awarded 769 tenders worth a total of $1.7 billion in the first half of the year (according to data from the government’s procurement regulator), with construction and engineering sector taking the lion’s share of contracts in the first six months, accounting for $588.3 million.
According to Ms Ghozzi, this emphasised the country’s continued commitment to its extensive pipeline of infrastructure projects, which will provide impetus for recovery in the sector towards the second half of 2021 and beyond.
In the medium term (2022/24), the government will restart stalled and new infrastructure projects and work will begin on numerous projects, including the airport.
GlobalData assesses that Bahrain remains dependent on Gulf neighbours and debt markets for financing its sizable fiscal deficit.
However, owing to the outbreak of Covid-19, weak oil prices and poor investor sentiment, the scope of such financing is limited and the kingdom is expected to require more Gulf backing.
The firm has cut its forecast for construction output growth for Saudi Arabia to negative 2.8pc from an earlier estimate of negative 1.8pc, and expects a recovery for the sector of 3.3pc in 2021.
This revision reflects the extended lockdown measures that were cautiously eased in July, along with an estimated one million expatriate workers who departed in the wake of the economic shutdown, as well as the uncertainty regarding the degree to which the government will be able to offset its oil revenue losses and stabilise its debt burden in the short term.
Prospects look bleaker for the Middle East and North Africa (Mena) region as a whole and the construction output growth forecast for 2020 has been cut to negative 4.5pc from the previous estimate of negative 2.4pc.
“Spending is likely to gather some further momentum in the near-term as more parts of the region’s economy reopen. However, a further weakening in the labour market and a potential drop in expat numbers – mainly in the GCC – are likely to weigh on consumer spending in the period ahead, affecting future construction plans,” said Ms Ghozzi.
