Questionable Sustainability Of Buoyant Pipeline
BMI View: Based on data from BMI 's Key Projects Database, we highlight construction activity in the UAE is set to grow over the coming years thanks to over US$200bn worth of projects already in the construction phase. However, in comparison to its regional peers there are much fewer projects in planning suggesting that once this building cycle is over, there will not be enough momentum to sustain growth over the longer term, reinforcing our real growth forecasts for a slowdown in the industry post 2019.
In line with our view that the construction sector in the UAE is finally recovering after years of poor growth, we have logged US$313bn of construction projects in our Key Projects Database across the infrastructure and residential and non-residential construction sectors. Increasing confidence in the industry has seen a number of large scale projects restarted or moved forward, which looks set to boost activity over the medium-term, especially since Dubai was awarded the World Expo in 2020 (see 'Expo Win: A World Of Opportunities', 28 November 2013).
While the 'under construction' figure is impressive - indeed there is more currently under construction in the UAE than anywhere else in the GCC - we highlight that our Key Project Database reveals a worryingly thin project pipeline with only US$25.3bn in the tendering or pre-tender phase. Without the projects to replace ones currently under construction, the solid return to growth we are currently forecasting will not be sustainable. We also note that while there will be numerous projects announced over the coming years related to the Expo, including the actual site of the event and related infrastructure, after large scale events we often see a major drop in new project announcements which may affect the long-term pipeline.
|Medium Term Promise, Long Term Concerns|
|UAE Projects, By Phase (at time of writing), US$bn|