RIYADH: Saudi Arabia has strengthened its position as a leading force in the global construction industry, with a remarkable performance in the second quarter of 2024.
According to the Royal Institute of Chartered Surveyors' Global Construction Monitor, Saudi Arabia achieved the highest construction activity index reading globally at +64.
This exceptional performance underscores the Kingdom's dominance in the Middle East and Africa region, where the overall CAI for the region was +24, reflecting a slight decrease from the previous quarter but continuing a streak of 14 consecutive quarters of growth.
Saudi Arabia's strong construction sector is driven by an extensive pipeline of projects, amounting to $1.5 trillion, which represents 39 percent of the $3.9 trillion total construction market in the Middle East and North Africa. This broad sector includes residential, commercial, industrial, infrastructure, transportation, and energy construction, creating significant opportunities for contractors.
Construction activity in other countries also showed significant growth. Mauritius and UAE recorded strong performances with CAI readings of +57 and +54 respectively. However, Bahrain and Qatar faced challenges, with Qatar's CAI at -28 indicating continued contraction in the region, exacerbated by the post-World Cup recession.
RICS chief economist Simon Robinson noted strong growth in the global construction sector, emphasizing significant expansion in India and key Middle Eastern countries such as Saudi Arabia and the UAE, contrasting with stagnation in regions such as China and Hong Kong.
South Africa also experienced improvement, with its CAI rising from -2 to +11. Meanwhile, Oman and Nigeria exhibited relatively positive CAI readings.
“In contrast, China and Hong Kong show little evidence of any change, while Qatar still appears to be suffering from a post-World Cup hangover,” said Robinson.
A survey of business inquiries indicated an increase in net balances in the MEA region at +20 percent. Saudi Arabia (+69 percent) and the UAE (+54 percent) saw strong expansion in business inquiries, while South Africa also reported positive trends (+16 percent). However, competition for talent between Saudi Arabia and the UAE has driven up costs, while a shortage of skilled engineers has affected the quality of construction.
Despite these challenges, industry optimism remains high. Expectations for workload and profit margins are improving, with a clear acceleration anticipated in the private residential sector, which is expected to increase workload by +32 percent over the next 12 months. The infrastructure sector is leading the performance in current (+38 percent net balance) and future workload indicators.
Financial pressures and skills shortages are significant challenges for the construction industry, affecting firms worldwide. Addressing housing shortages and upgrading infrastructure to meet the challenges of climate change remain an important focus.
Overall, the strong performance and continued growth of the Saudi construction market highlights the Kingdom's pivotal role in shaping the future of the global construction sector.
