Heavy public spending will ally with a shortage in housing units to keep the momentum in Saudi Arabia’s construction sector this year despite a sharp slowdown in bank credit, the Gulf Kingdom’s largest bank has said.
As part of its record high annual budget, Saudi Arabia has allocated SR260 billion for infrastructure and construction projects, the highest ever capital expenditure approved by the world’s oil superpower.
Although a business index introduced recently by National Commercial Bank (NCB) showed a slight decline in the third quarter, the construction sector will remain vibrant through 2010, NCB said in a study.
NCB expected the construction industry worldwide to remain heavily reliant on government spending to stimulate economic growth and create jobs for the remaining part of the year in the aftermath of the 2008 global fiscal crisis.
With the exception of a few emerging economies like China, India and Brazil, the private sector demand is forecast to remain sluggish in the short term and the majority of growth in construction would be driven by infrastructural work.
“In line with this trend, the Saudi Arabian budget for 2010 has also allocated a remarkable 40 per cent (SR 260 billion) of the total projected government expenditure towards capital investment projects, underscoring the country’s determination to build key infrastructure,” NCB said.
“This combined with the current shortage of residential units will keep the activity in the construction and ancillary sector robust in the near term.”
But NCB noted that its business index showed a slight decline in the outlook for the Gulf Kingdom’s construction sector in the third quarter of 2010. It was the first decline after an increase for the last three consecutive quarters, it said.
Source: Emirates News 24/7