Boston, MA -- (ReleaseWire) -- 09/21/2012 -- BMI View: A significant upward revision of historical data by the Saudi National Commercial Bank, and a 140% year-on-year (y-o-y) increase in contract awards during 2011, have prompted us to adjust our 2012 construction forecast. Taking into account 11.6% real growth in 2011 and the sheer number of projects in the pipeline, we expect equally robust 9.3% real growth for 2012. We furthermore anticipate this trend to continue in the short to medium term on the back of the government's vast infrastructure investment scheme, aimed at staving off public discontent, and forecast an annual average real growth of 5.6% between 2012 and 2016.
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We are now forecasting 9.3% and 6.5% real growth in 2012 and 2013, respectively. This reflects the significant number of contracts awarded in 2011 (140% increase y-o-y), as well as increased government spending, which was pledged in response to popular discontent and the Arab Spring. Over the medium term, we continue to forecast robust average growth of 5.6% between 2012 and 2016.
Sectors To Watch:
- One of the most dynamic sub-sectors in Saudi Arabia has been power plants and transmission and distribution (T&D), with the US$80bn, 10-year investment plan for electricity infrastructure (2008-2018) having led to significant activity in the energy sector. BMI estimates that there are power projects worth US$30bn under way or in the pipeline, with the majority of these including the construction of new capacity. It is estimated that there is 30 gigawatts (GW) in development. Notably, a consortium led by Saudi-owned ACWA Power has started construction on the largest independent power generation project (IPP) globally at Qurayyah. The project is a major development in the Saudi power sector and is a substantial component of the country's plan to meet its rapidly increasing power demand.
- Huge investment into the social infrastructure sector is in the pipeline, in part to appease the populace. Both the SAR1.44trn (US$385bn) Ninth Development Plan (2010-2014) and social benefit packages, which is worth a total of US$130bn, announced in response to protests in which swept the Middle East during 2011, are heavy on social infrastructure spending. Healthcare and education investment are growing, and the potential for private sector participation is increasing. On the other hand, huge social housing projects are already in the pipeline, with SAR250bn pledged and construction of 500,000 housing units planned.
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