Saudi construction activity plunges in 9 months

Approximately SAR34.3 billion (Dh34 billion) worth of contracts were awarded during Q3 2014. (Reuters)

Saudi Arabia's construction activity sharply receded in the first nine months of 2014, with the value of awarded contracts dipping by nearly 37 per cent, according to the Gulf Kingdom's largest bank.

In the third quarter of 2014, the value of awarded contracts tumbled after showing signs of recovery during the previous quarter, National Commercial Bank (NCB) said in its quarterly construction report sent to Emirates 24|7.

Approximately SAR34.3 billion (Dh34 billion) worth of contracts were awarded during Q3’14 while the value of awarded contracts in August slumped to SAR4.3 billion (Dh4.2 billion), which was the lowest output since April of 2010, it said.

Through the first three quarters of 2014, the value of awarded contracts reached SAR158.9 billion (Dh158 billion), the report showed.

"The decline in the value of awarded contracts during Q3'14 put a halt in the strong momentum that was witnessed during H1'14."

It showed the value of awarded contracts during Q3'14 yielded a significant shortfall compared to Q3'13, which reached SAR148.9 billion (Dh147 billion) alone, a 77% decline. Furthermore, the first three quarters of 2013 yielded SAR251.6 billion, marking a 37% decrease for 2014 thus far, the report said.

"Undoubtedly, the value of awarded contracts in 2014 is not expected to come close to 2013's record of SAR293 billion (Dh291 billion), although it must be noted that 2013’s performance was significantly enhanced by the Riyadh Metro project whereby SAR85 billion (Dh84 billion) worth of contracts were awarded."

he report showed NCB's Construction Contracts Index (CCI) maintained a relatively healthy level on the back of strong performances during Q2'14.

The CCI leveled from 302.39 points in July followed by 286.60 points in August and settling at 290.70 points in September, it showed.

While the CCI is currently hovering within the 200-300 point range, a strong fourth quarter is needed to prevent a sub-200 point showing, given the weak pipeline of awarded contracts during Q3'14, it said.

"The stalling of awarded contracts during the third quarter halted the momentum that was witnessed during the first half of 2014. As a result, the value of awarded contracts is expected to fall short of 2013’s record performance of SAR293 billion. Nonetheless, while the value of awarded contracts may end far below that of 2013, the fourth quarter still re-mains and may reenergize the contracting market heading into 2015."

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