The value of awarded construction contracts in Saudi Arabia increased to more than SR52 billon in the first quarter of 2012 and the rise indicates the sector is set to boom through the year, a key bank said on Sunday.
A large part of the awarded contracts involved sectors that were highlighted in the Gulf Kingdom’s 212 budget, the largest to be approved by the world’s oil powerhouse and largest Arab economy, National Commercial Bank (NCB) said in its construction index report sent to Emirates 24/7.
It said the total value of construction deals awarded in the first quarter of this year totaled around SR52.2 billion (Dhb51.6 billion) compared with SR49.7 billion (Dh49.2 billion) in the first quarter of 2011.
“The value of awarded contracts during the first quarter of 2012 continued unperturbed, signaling a strong start in awarded contracts for the year.
This reflects a significant shift away from the typical lull that occurs during the first half of the year,” the report said.
“While we expect the construction sector to continue its significant contribution to the Kingdom’s economy, the performance of the sector in the first quarter shows that 2012 will continue to sustain the construction boom.”
The report showed the sectors that were highlighted in the Kingdom’s 2012 budget as areas of focus, such as education, roads, healthcare and urban development, contributed to the fast start as a result of considerable injections by the government to deploy its capital expenditures.
Those sectors alone accounted for more than SR15 billion or nearly 30 per cent of the total value of awarded contracts. Anchor sectors, such as the petrochemical, power and industrial sectors accounted for more than SR23 billion or 44 per cent of the total value of awarded con-tracts.
“The plethora of public funding of projects towards infrastructure related construction is aimed at alleviating most of the shortfalls in basic services while accommodating the future needs of a rapidly growing population.”
The report showed the Construction Contracts Index (CCI) rebounded from January’s 312.45 points by gradually increasing to 329.07 and 349.03 during February and March, respectively.
The CCI was sustained by the first quarter’s strong performance coupled with an impressive run of numerous mega projects that were awarded at the conclusion of 2011, the report said.
Furthermore, it added, the CCI recorded a 86 per cent boost during the first quarter of 2012 compared to the first quarter of 2011. “This is noteworthy given 2011’s extraordinary output of awarded construction contracts.”
A geographic breakdown of awarded contracts revealed that the Eastern Province commanded the largest share with an overwhelming 36 per cent of the total value of awards, according to the study.
Mega projects in the petrochemical and industrial sectors contributed to Eastern Province’s commanding share, it said.
In Western Saudi Arabia, the Makkah region’s 22 per cent share was mainly attributed to the government’s emphasis on urban development in Jeddah as well as the continued focus on developing affordable housing options for its citizens. The central Riyadh region benefited from increased infrastructure related improvements lending to numerous awarded contracts in the power and road sectors, allowing that region to capture a 15 per cent share.
“The value of awarded contracts during the first quarter signals that 2012 is off to a rapid start as heavy spending across most of the sectors has led to an impressive beginning to the year,” NCB said.
“Given the government’s plan to increase capital expenditures for 2012, we anticipate the flow of awarded contracts to remain undisturbed as the demand for improved infrastructure still remains a priority….. Additionally, the Kingdom’s strategic goals to develop its non-hydrocarbon sector will likely encourage heavy investments into the hospitality, healthcare and education sectors for years to come.”