18 Jun 2020
Posted in Construction
Further cuts to MENA construction sector as impact of COVID-19 and low oil prices deepen
The 2020 construction output growth for the Middle East and North Africa (MENA) region has been revised down to -2.2% (down from -1.4% previously), according to GlobalData, reflecting the disruption caused by the spread of COVID-19 and the weaker economic outlook.
Yasmine Ghozzi, Economist at GlobalData, comments: “Despite oil exporting countries’ efforts to shore up oil price to slightly compensate for the loss of revenue, the collapse in tourism is likely to reduce GDP by 3% in Egypt, Morocco and Tunisia and remittances from oil rich gulf and Europe. The decline in company earnings and government revenue will ensure that planned investments will be curtailed in the coming quarters.”
The immediate business impact of preventative measures against COVID-19 has hit the commercial sector hard. When businesses reopen and restrictions on movement are eased more during the third quarter, demand is only expected to rebound marginally and the recovery in spending will be contingent on confidence picking up. The lockdown is also likely to lead to long-lasting changes in consumer behavior and shape future investments in the sector.
Ghozzi concludes: “Providing some scope for further gains in oil prices, OPEC+ has agreed to cut output by 9.6 million barrels a day from July. Any member that does not comply with 100% of its curbs in May and June will make extra cuts from July to September to compensate. Following the announcement, Brent crude has risen, and is more than doubled the level in late April.”