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Saudi Arabia Infrastructure Report Q2 2014

Saudi Arabia Infrastructure Market: New market information published

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2014-02-10 03:01:04 - Saudi Arabia Infrastructure Report Q2 2014 - a new market research report on

Saudi Arabia remains one of the most lucrative construction markets in the Middle East, with the government pumping billions into infrastructure and construction projects. That said, over the shortterm our view on capacity constraints in the labour markets dragging on growth continue to play out reaffirming our decision to downgrade our short-term forecast for the industry in late 2013. We have priced in the anticipated delays in projects as a result of shortages in labour and materials, and therefore see growth at 7.2% in 2014. However, with project awards continuing at rapid pace, and a sizable backlog awarded since 2011, we believe the sheer size of the project pipeline in Saudi Arabia will ensure high growth rates over the medium



term. Combined with a gradual easing over H214 of labour and materials shortages, we anticipate activity to return to its buoyant growth trend from 2015 onwards.

In Q413 we downgraded our near-term outlook for growth in the Saudi construction industry as labour shortages, as a result of the government´s crack-down on visas and drive for Saudisation, were set to delay projects. This has played out and has dragged on growth across the sector, from projects being delayed and cancelled to lower cement sales in Q413. Exacerbating the issue, a severe cement shortage led the government to initiate measures including emergency funds to import 10mn tonnes of cement - further delaying and increasing the cost of projects. We believe these issues will begin to dissipate over H214 and once resolved, the clearing of the construction backlog, combined with more recently awarded contracts, such as the US$22.5bn Riyadh Metro project, should see real growth return strongly from 2015, with 10.5% estimated.

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Mike King
Phone: London: +44 (0) 203 086 8600

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