Saudi Arabia forecast to lead construction sector in Mena region

The wider MENA region's infrastructure and construction market is among the world's most attractive given its sheer size and will continue to grow as a result of the implementation of structural reforms aimed at raising productivity of the non-oil sector, according to the report.

Forecasting figures predict a total of $4.3trn will be invested in construction projects across the region by 2020, representing an increase of almost 80% from today's spend in the sector.

Putting these projections in a broader context, the study said the region is expected to account for 12% of the global emerging markets and 4.4% of the world construction markets within the next decade, with Saudi Arabia leading the way.

"Due to many years of underinvestment, we expect Saudi Arabia to take the lead in terms of construction spending in the MENA region as the Kingdom responds positively to pressing social needs such as labor, housing and education," said Philip Southwell, Bank of America Merrill Lynch president and country executive, Middle East and North Africa.

The report noted that while MENA contract awards declined by 41% in the first five months of 2012 compared to the same period last year, the main reasons for this decline can be primarily attributed to delays in awarding petrochemicals projects in Egypt and delays in awarding construction and infrastructure contracts in the UAE, Kuwait and Iraq.

"The construction and infrastructure sub-sectors in Saudi Arabia, however, remain strong, growing by 177% over the same period, and currently accounting for 46% of the 2012-2013 MENA project pipeline totaling $448bn," said Mutashar Murshed, Merrill Lynch Kingdom of Saudi Arabia CEO.

"It is a trend we expect to continue," Southwell added. "With its young and expanding population, Saudi Arabia should remain the most buoyant market, in line with its overall economic development plan. Furthermore, the recent approval of the mortgage law should help to drive growth in residential construction in response to the current housing shortage."