The upward trend in oil prices, driven in part by the Russia-Ukraine conflict, has led to an improvement in the economic conditions of countries in the Middle East and North Africa (MENA) region that have the largest oil and gas reserves, says GlobalData. The leading data and analytics company notes that although there are downside risks stemming from Russia’s invasion of Ukraine – notably owing to higher inflation and lower investor confidence – construction output in the region is relatively strong, with growth expected to stand at 4.4% in real terms in 2022.

GlobalData’s latest report, ‘Construction Market Size, Trends and Growth Forecasts by Key Regions and Countries, 2022-2026’, reveals that all the countries in the MENA region are expected to post positive growth, with Kuwait, Iraq and Egypt expected to post the highest growth. Apart from the higher oil and gas prices, the sanctions on Russia will also lead to higher investments in the region’s oil and gas sector as European countries try to wean off Russian oil and gas.

Dhananjay Sharma, Analyst at GlobalData, comments: “The surging oil prices and the sanctions on Russia are expected to benefit countries in the MENA region that are rich in oil and gas resources. These countries are expected to have surplus revenues once again, which will lead to the revival of projects that were stalled during the pandemic and simultaneously increase governments’ capabilities to spend on other projects. There will be growth all round in the construction sector, with investments in power, oil and gas, tourism and other infrastructure sectors leading the pack.”

In addition to the Ukraine war and the challenging macroeconomic environment, prevailing risks associated with the pandemic remain, notably the emergence of new infectious or more lethal strains, as well as lockdowns in markets with a ‘zero-COVID’ policy. However, in markets where there have been successful vaccine rollouts, international travel restrictions are being widely relaxed and day-to-day life and economic activity is returning to normal. Nevertheless, a resurgence in COVID-19 cases and the potential for restrictions on construction works and the availability of labor remains a core downside risk to the industry’s outlook.

Sharma concludes: “The opening up of economies is also leading to investments in the tourism sector and related segments resuming. Investment in the residential sector has recovered quickly due to pent up demand as well as government support measures and housebuilding programs aimed at narrowing housing supply deficits in many markets. However, inflation poses major downside risks, with increases in food grain prices hitting the disposable income of many households, while the increase in building material costs may render projects unviable in the short term.”