In focus Middle East

General economic overview

The Middle Eastern economies rebounded during 2021 and into 2022, led by a surge in energy prices in Saudi Arabia as global demand for oil and natural gas increased strongly and widespread air travel returned. The rising cost of oil per barrel has helped create more liquidity for the sovereign wealth funds which are driving nation building programmes across the region.

Across the Gulf, costs of transport have increased and imported goods prices are rising due to international supply chain challenges. Inflation rates, however, have not experienced the large increases seen in other parts of the world.

Construction sector performance

There is significant market activity across the Middle East, with most regions experiencing a new wave of significant projects in 2022.

Progress of the environmental agenda

Given its climate and geography, the Middle East is an ideal location for renewable energy generation and there are several large-scale projects under way, which will no doubt be accelerated by the hosting of COP28 in the UAE in 2023.

In Dubai, the Mohammed bin Rashid Al Maktoum Solar Park is a large-scale solar and thermal storage facility being implemented in five phases and planned to produce 5GW of solar energy by 2030. Two other projects, the Al Dhafra (2GW) in Abu Dhabi is now close to completion and the Abu Dhabi PV3 (1.5GW) was recently tendered for construction.

Future outlook

The immediate future looks positive with a growing list of large-scale construction projects and lower inflation than elsewhere.

Nevertheless, there is a growing risk of rising construction costs in overheated construction markets. Port and transport bottlenecks in the international shipping sector will be an ongoing issue and it may take until 2023 to fully ease the flow of goods, cutting shipping times and lead times. Global commodity prices such as steel and copper should eventually lower as more production comes onstream.

Current disruptions to energy supplies caused by the Russia-Ukraine war create an opportunity in many ways for the energy-producing nations in the Middle East, which should in turn further their realisation of major construction and engineering projects.