Dubai, United Arab Emirates, June 28, 2020: Construction sector in the GCC countries will continue to thrive despite the temporary thaw in activities caused due to the unprecedented Covid-19 crisis that almost halted the global economic activities and triggered a panic reaction across the world.
There are a number of realistic reasons for the optimistic outlook. First, more than a third of the region’s 54 million people are younger than 25 years of age. All of them are going to enter the productive phase in their lives – earning a decent living, getting married and raising a family within the next 3-5 years. They would look for housing facilities, be it an apartment or a villa, within this timeframe.
In addition to the housing facilities, the governments will have to invest in infrastructure – roads highways, utilities, soft infrastructure – to help the new families grow.
Despite the current fall in economic activities – which is a very temporary phenomenon – the region’s US$3.4 trillion economy will continue to grow from next year.
Besides, construction sector in the GCC region is linked to oil price. As long as oil price remains above the breakeven oil price level of US$50, the sector will benefit from it as the governments will continue to build infrastructure and expand housing facilities for its people.
So, it’s just a matter of time for the sector to come back. Oil is already trading above US$40, while half of the world is still under partial lockdown. Oil price will rebound to above US$50 in a few months, when the construction sector will see new projects coming up.
Even Rizwan Sajan, Founder and Chairman of Danube Group shares the same opinion, commenting on the likelihood of construction sector going back on track, he said,” As we all are aware that every part of the economy is connected to one another, as soon as there is development in one, the sectors connected to it, can be seen growing. It would be fair to say that construction sector will revert to normal when the oil price surge above 50 dollars per barrel which is currently trending above 40 dollars per barrel.
This drop in oil prices can be ascribed to the world being under partial lockdown. So, the prices per barrel would soon go higher than 50 dollars once economy of each country is reinstated”, He further added”.
In addition to these factors, the world-class infrastructure, strong global connectivity, liberal laws, investment-friendly legal reforms as well as the good quality of life will continue to attract foreign investment and investors to the region that will continue to drive the demand for new facilities that will drive the demand for construction activities.
So, we do not see a lull in the construction activities in the near future. The current market sentiment has been dampened by the Covid-19 pandemic and it doesn’t give the right picture. The macro-economic fundamentals will continue to remain strong for the GCC. The current situation is a temporary hiccup – in the larger scheme of things – and should be seen likewise.