Cairo & Morocco: Brighten MENA’s Outlook

    The World Bank says that this year appears to be one of the toughest for the region as MENA governments face serious policy challenges. The biggest challenge for oil exporters is managing their finances and diversification strategies with oil prices below USD45 a barrel. Fiscal consolidation in a difficult sociopolitical environment and spillovers from conflicts are creating challenges for oil importers as well. Persistently low oil prices, lower fiscal revenues and currency shortages have forced MENA governments to take austerity measures including cutting capital and current spending. 

    More than USD20 billion of projects may be canceled in Saudi Arabia. This comes at a time when ongoing conflict and war in Syria, Iraq, Libya and Yemen are ravaging these economies and the refugee crisis is draining fiscal space in neighboring countries. Furthermore, private sector growth, a source of job creation, has slowed down making it difficult to absorb the large of number of unemployed. The latest labor market data show that the unemployment rate has remained stubbornly high in Egypt, Iran, Iraq, Jordan, Morocco and Tunisia in 2016. Real GDP growth in MENA is projected to stay at its lowest level for the fourth consecutive year, at around 2.7% in 2016. Spending cuts have also lowered growth in non-oil sectors. Non-oil growth in Algeria is estimated to fall to 3.7 percent in 2016 compared to 5 and 7 percent respectively a year before. 
    But the picture is brighter looking further ahead. Regional growth is expected to improve slightly to 3.2 and 3.6 percent over the next two years, as governments across the region are consolidating their fiscal stance, undertaking reforms and trying to diversify their economies away from oil. According to bnc research at the Big5 Construct Africa, the construction market in North Africa has been growing steadily. New investment opportunities are opening up as geopolitical tensions gradually ease and governments rebuild their economies. According to the BNC Project Intelligence Database, there is approximately USD473 billion worth of active projects in North Africa, the majority of which come from Egypt. The construction market in North Africa has experienced several challenges as a result of the decline in commodity prices, lack of regulatory reforms and geopolitical unrest. Basic infrastructure investments are ongoing as government sponsored projects are aimed at promoting economic and social development. Foreign investors and private contractors are also taking part in lucrative contracts, which is supporting some construction activities in the region. 

     “…there is approximately USD473 billion worth of active projects in North Africa, the majority of which come from Egypt”

    The urban construction and utilities sectors constitute the two largest sectors in the region. Governments are investing in the utilities sector to address the pressing constraints of the existing powers systems such as planned outages and load shedding arising from insufficient infrastructure. Technological innovation such as renewable power is also driving change, especially since the cost of renewable power is reducing and thus becoming more economical for widespread use. Egypt constitutes approximately 71% of the total project investments in North Africa, following the announcements of several high-value projects in the urban construction and utilities sectors. The urban construction and utilities sectors have a combined estimated value of nearly USD300 billion and constitute approximately 63% of all project investments in North Africa.  The majority of project investments in North Africa seem to be concentrated in a few sectors. The announcements of high value projects such as the Capital Cairo in Egypt (USD45 billion) and the Industrial Park in Morocco (USD10 billion) indicate a healthy pipeline of project investments, especially since these projects are in the initial stages of construction.  Beyond favorable demand drivers, shifts in technology will be key in influencing growth in the region, BNC reports. dmg events said that in Morocco, the output value of the construction industry will rise at a compound annual rate of 4% over the next four years, according to the Moroccan Investment Development Agency forecasts.  

    ACW Staff