Qatar and Oman remain growth outperformers in the MENA region over 2017 and are key drivers of our overall regional real growth forecasts, which see 6.0 % y-o-y real growth. MENA as a whole will be one of the fastest growing regions globally, with growth peaking in 2018/2019.
According to BMI research, an uptick is expected in construction industry value real growth from 2017 and into 2018 for the Middle East and North Africa (MENA) region, largely on the back of our expectation for a gradual increase in global oil prices, which will begin to ease fiscal pressures on the oil producers and upcoming major events.
The shock of the oil price drop has, however, firmly entrenched the need for economic diversification and goals are now firmly in place for governments across the region. While fulfilling the goals will remain challenging, the markets undergoing economic diversification will be the chief drivers of infrastructure growth.
MENA Infrastructure RRI: GCC Dominates MENA and Global Rankings
GCC infrastructure markets offer the best balance of strong opportunities and low risk business environment regionally and globally. This is reflected in their dominance of the top spots of our new Risk/Reward Index (RRI) league tables both for Middle East and North Africa (MENA) and on a global level. Beyond the GCC in MENA, strong Rewards on offer in Egypt, Iran and Morocco on the back of solid growth and industry size belie high operational risks, while Iraq, Libya and Yemen that are locked in conflict languish at the bottom of the regional table. We expect to begin to see a recovery in rewards over the year and into 2018 off the back of higher oil prices. BMI forecasts Brent crude will average USD57 per barrel over 2017, which will relieve pressure on governments' budgets as well as buoy investor sentiment towards oil exporters.
Strong construction industry real growth forecasts, which average 12.1% annually over the coming five years, and an infrastructure project pipeline stocked with numerous high-value projects related to the FIFA 2022 World Cup, see Qatar outperform the larger construction markets of the UAE and Saudi Arabia and land the top spot in our regional and global Infrastructure RRI league tables.
Qatar is followed by the UAE in second place, globally and regionally. The UAE's large construction industry sector, combined with a strong score for construction sector business environment (contracts, timeliness of project execution) and political and economic stability – especially compared to its peers in the regionbolster its overall score.
Overall the MENA region outperforms the global average scores for Industry Rewards and Country Rewards, reflecting high levels of investment in construction projects to serve a growing and increasingly wealthy population.
However, MENA underperforms on Industry Risks and Country Risks, indicative of often opaque and corrupt business environments – most notably in non-GCC countries – as well as elevated political risk across many markets.
Reflecting a range of systemic economic and political risks in the region ranging from uncertain lines of succession, embedded terrorist threats and conflict, to painful economic realignments in the face of lower for longer oil prices, MENA has the second lowest regional average Country Risk score globally, ahead of Sub-Saharan Africa.
BMI Research
26 July
