Just as the war in Ukraine is disrupting supplies and fuelling already-high inflation, economic growth in the Middle East and North Africa (Mena) region is forecast to be “uneven and insufficient” this year, according to the World Bank.
Growth rates in the region envisage a narrative of diverging trends. As oil exporters benefit from surging prices, higher food prices have hit the whole region.
The GCC is expected to notch up 5.9% growth this year, buoyed by oil prices and helped by a vaccination rate much higher than the rest of Mena. But most Mena economies — 11 out of 17 — are not seen exceeding their pre-pandemic GDP per capita in 2022, says the World Bank.
GCC economies have seen a relatively strong start to 2022 with the hydrocarbons sector having benefited from increased oil production so far this year, says Emirates NBD. Its survey data for the first quarter of the year point to a solid expansion in non-oil sectors as well, with strong growth in business activity in the UAE, Saudi Arabia and Qatar. In the wider Mena region, however, countries like Egypt, Morocco and Tunisia – home to large, mainly urban populations, but lacking oil wealth – are struggling to maintain subsidies for food and fuel that have helped keep a lid on discontent.
Egypt has been struggling to maintain a bread subsidy programme used by about 70mn of its citizens with the coronavirus pandemic hitting the national budget, and surging wheat prices are exacerbating the challenge.
The World Food Programme has warned that people’s resilience is at “breaking point,” in the region. Global foods costs are up more than 50% from mid-2020 to a record and households worldwide are trying to cope with the strains on their budgets. In North Africa, the challenge is more acute because of a legacy of economic mismanagement, drought and social unrest that’s forcing governments to walk a political tightrope at a precarious time.
The MENA region’s net food and energy importers are especially vulnerable to shocks to commodity markets and supply chains resulting from Russia’s war on Ukraine, according to the International Monetary Fund.
That’s in countries where the rising cost of living helped trigger the Arab Spring uprisings a little over a decade ago. The region’s GDP is forecast to rise 5.2% this year after an estimated 3.3% expansion last year and a 3.1% contraction in 2020.
“Even if this high growth rate for the region as a whole materialises in this context of uncertainty, and there’s no guarantee that it will…(it) will be both insufficient and uneven across the region,” according to Daniel Lederman, World Bank lead economist for the MENA region.
Countries that are net importers of oil and food and which entered 2022 with high levels of debt as a ratio of GDP are most vulnerable, he said, pointing to Egypt and Lebanon as examples. Even before Russia invaded Ukraine, food prices had been rising around the world, driven by the higher shipping costs, energy inflation and labour shortages that have followed in the pandemic’s wake, along with extreme weather. Food crisis was likely to worsen in the Middle East and North Africa as Covid-19 continued, according to a report from the regional directors of Unicef, the Food and Agriculture Organisation, WFP and World Health Organisation in July 2021.
Reportlinker.com announces the release of the report “Construction Global Market Report 2021: COVID 19 Impact and Recovery to 2030”.
Construction Global Market Report 2021: COVID 19 Impact and Recovery to 2030
Major companies in the construction market include China State Construction Engineering Co Ltd; China Railway Group Ltd; China Railway Construction Corporation Limited; China Communications Construction Group Ltd and Vinci SA.
New York, Feb. 01, 2021 (GLOBE NEWSWIRE) — The global construction market is expected to grow from $11491.42 billion in 2020 to $12526.4 billion in 2021 at a compound annual growth rate (CAGR) of 9%. The growth is mainly due to the companies rearranging their operations and recovering from the COVID-19 impact, which had earlier led to restrictive containment measures involving social distancing, remote working, and the closure of commercial activities that resulted in operational challenges. The market is expected to reach $16614.18 billion in 2025 at a CAGR of 7%.
The construction market consists of sales of construction services and related goods by entities (organizations, sole traders and partnerships) that construct buildings or engineering projects (e.g., highways and utility systems). Establishments that prepare sites for new construction and those that subdivide land for sale as building sites are included in this market. The construction market includes new work, additions, alterations, maintenance, and repairs. The construction market is segmented into buildings construction; heavy and civil engineering construction; specialty trade contractors and land planning and development.
Asia Pacific was the largest region in the global construction market, accounting for 42% of the market in 2020. North America was the second largest region accounting for 26% of the global construction market. Africa was the smallest region in the global construction market.
Building construction companies are increasingly using green construction techniques to build energy efficient buildings and reduce construction costs. Green construction refers to the practice of using sustainable building materials and construction processes to create energy-efficient buildings with minimal environmental impact. According to World Green Building Trends Survey 2015, about 51% of construction firms in the UK were involved in green construction projects. Certifications such as Leadership in Energy and Environmental Design (LEED) help construction companies to develop high-performance, sustainable residential and commercial buildings, and also offer a variety of benefits, from tax deductions to marketing opportunities. Sustainable construction materials such as natural paints and steel beams made from recycled material are being widely used in the UK. Other green construction techniques such as cross-ventilation for more natural environment, green construction software such as Construction Suite to ensure green compliance, and Green Globes management tool are also being used in the construction industry. For instance, some, Major companies using green construction techniques include Turner Construction Co, Clark Group, AECOM, Hensel Phelps and Holder Construction.
Construction costs have increased steadily due to rising material costs in the historic period. Companies in the industry experienced subdued growth in their profits with rising prices of materials such as crude oil, a key component of asphalt increased by 49%, softwood lumber, a major component used for buildings construction, which rose by 23% during historic period. In 2018, cement prices rose 2.5% and plumbing and fixtures increased by 3% in the US. High material prices adversely affected the construction market during historic period.
The construction market growth in the historic period was mainly driven by the increase in construction activity in emerging markets. Emerging markets which registered robust construction activity included China, Brazil, India, Saudi Arabia and Indonesia. For instance, China’s construction market grew from $1,653 billion in 2016 to $2,279 billion in 2019. This rapid growth in construction activity contributed to the growth of the construction market.
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The pandemic has helped boost digital marketplaces in the region, opines Muhammad Chbib, CEO at Tradeling.
7 November 2020
The pandemic has propelled the use of e-commerce in the region and globally. What are the key trends you have seen? The most significant trend is the growth of homegrown capabilities in e-commerce in the region. Globally, while e-commerce has been recording strong growth – accelerated no doubt by the pandemic – the region has witnessed a transformational growth in the evolution of the digital economy. Not only have our homegrown companies demonstrated strong resolve to meet the needs of the people and support them, we have seen a tremendous amount of entrepreneurship – with new startups entering the market and building their own niche.
The second trend is more consumers warming up to the possibilities offered by e-commerce. While digital commerce was gaining momentum, one of the factors that has stymied its growth in the region is the relatively lower credit card penetration in some markets. There have also been typical concerns associated with conducting everyday business online. However, one thing the pandemic has brought about is the adoption of digital payments and the increased confidence of consumers to shop online and conduct e-commerce transactions.
In the B2B e-commerce space, how high is the penetration in the GCC market? Has it grown significantly this year? While B2B e-commerce was evolving at a slower pace compared to consumer-oriented digital business, this year has witnessed a real transformation. I believe it is a case of supply and demand. What matters is that in the new reality, business customers too want to access products and services easily, quickly and efficiently. We see a growth in the B2B marketplace – here in the UAE – and growing enquiries from across the GCC.
Which are the verticals within the sector where you see most scope for growth? It is really a matter of bringing more options to the customer, whatever the vertical. Customers like to shop around and feel they get value for money and exemplary service. But it is also a matter of sourcing new products and services that aren’t in the region yet.
For those entering the digital B2B industry, what are the main challenges? The main challenges are finding the right talent with expertise and insights into the B2B sector, which is a different terrain compared to B2C e-commerce. An in-depth understanding of the global market is essential in addition to knowledge of the trading dynamics. You must be flexible and agile to overcome any unprecedented situation. It is also a matter of understanding the customer – the B2B customer is very different from the B2C customer.
Our priority is making the customer journey seamless, taking away their pain points and streamlining processes to ensure efficiencies that save them time and money.
Tradeling launched in April, in the midst of the lockdown – how was your experience? Do you have any immediate plans to expand? We created Tradeling during the pandemic to connect regional and global suppliers to MENA-based business demand. Today, we have close to 400 suppliers from over 25 countries with gross merchandising value increasing from zero to a high two-digit million figure in just three months.
The key to overcoming the challenges was to enhance market confidence and we took decisive steps in this regard. Today, we have gone from a team of 40 to nearly 100 people and we continue to hire.
From logistics to financing support to ensuring a fully secure payment gateway, we are the first of our kind B2B platform across the region. This is our USP and this integrated approach to business has enabled us to address the challenges.
Looking ahead, what is the future of digital marketplaces in the region? Digital marketplaces constitute the future of retail and in the new reality, they will record a stronger rate of growth compared to brick-and-mortar retail. But the key for success is to define your own unique niche for the marketplace; increasingly, we see online aggregators trying to capitalise on the opportunity, which will only lead to market fragmentation. What we need is bold, innovative ideas that will help accelerate the momentum of e-commerce growth in the region.COVID-19DIGITAL MARKETPLACEE-COMMERCEGCCTRADELING
Anirban Bagchi Posted on October 21, 2020 in MEConstruction News that Euro Auctions reports rise in lot prices, bidders and online bids at September Dubai sale. What is the meaning of such a movement? Anirban Bagchi explains.
Internet buyers double in number as average lot prices go up 63% while first time bidders grow exponentially
Euro Auctions has reported a year-on-year increase of 63% in average lot prices at its September sale in Dubai while first-time bidder registrations rose by nearly 300%, with 20% of the new bidders placing successful winning bids.
The global machinery auctioneers said the results prove that there “is an appetite for good used equipment in the region” and that Euro Auctions is “fast becoming the auction of choice for buyers and sellers in the Middle East for the disposal of stock to a true international audience”.
According to Euro Auctions the Dubai sale on September 28th attracted increased number of bidders, doubling the number of internet buyers, and also increasing the number of UAE vendors. The one-day sale resulted in 33% of all bids being transacted online proving the success of the marketing reach for this sale.
Bidders for the sale came from 65 countries, of which, 21 countries successfully bought on the day. Online bids came from 19 countries around the globe, with the top bidding countries being the UAE, Saudi Arabia, the Netherlands, the UK and Africa countries as a whole.
Derek Bleakly, general manager of Euro Auctions, Dubai, said: “Euro Auctions has been working hard with consignors across the Middle East over the last three years to build awareness and trust, demonstrating that our auctions are the place to bring good equipment, which in the Gulf, is in high demand. Plant and machinery auctions are no longer seen as the place to dump old, poor quality, low-spec machinery. Quite the reverse in fact, with many rental companies sending entire fleets of good, well-maintained two- to three-year-old machines to auction, making ideal purchases for dealers, contractors, and civil engineering companies.
“In last 12 months since mid-2019, there has been a marked uptake in the Middle East market for good machinery and equipment. Contractors and rental companies in the Middle East have been buying relatively low levels of new machines for the last 4-5 years and, as a result, stocks of plant are aging. Not buying through dealerships, buyers have turned to auctions for good late-year machines as well as new unused stock.”
Euro Auctions added that now with Covid-19 affecting the global economy, the used equipment market could well boom in the next 12 months. The auctioneer projected that with major OEMs pausing production globally, as happened in 2008, it is likely that when demand increases, OEMs will be unable to accelerate production, fuelling a demand for good, late, low-hours equipment. Euro Auctions has several other sale events around the world for the remainder of this year, including another in Dubai on December 14th.
This Moody’s negative rating outlook for the 2020 GCC sovereigns was published after it issued a little earlier, a similar downgrade for GCC corporates. But before we start wondering how relevant and whether, in this day and age, it applies to the MENA region and particularly to the Gulf sub-region, let us see who and what is behind Moody’s. It has by the way in 2018, citing as always, the still on-going and potentially worsening geopolitical event risks that play a crucial role in defining sovereign credit quality, come up with a particular set of ratings. Moody’s Corporation is the holding company that owns both Moody’s Investor Services, which rates fixed-income debt securities, and Moody’s Analytics, which provides software and research for economic analysis and risk management. Moody’s assigns ratings based on assessed risk and the borrower’s ability to make interest payments, and many investors closely watch its ratings.
ZAWYA GCC on January 9, 2020, posted the following articles.
The image above is used for illustrative purpose. A screen displays Moody’s ticker information as traders work on the floor of the New York Stock Exchange January 20, 2015. REUTERS/Brendan McDermid
GCC sovereigns’ 2020 outlook is negative, says Moody’s
Negative outlook reflects slow progress on fiscal reforms, weak growth and higher geopolitical risks.
Moody’s Investors Service said in a report that the outlook for sovereign creditworthiness in the Gulf Cooperation Council (GCC) in 2020 is negative.
The negative outlook reflects slow progress on fiscal reforms at a time of moderate oil prices, weak growth and higher geopolitical risk, the ratings agency said.
“The pace of fiscal consolidation will remain slow in the GCC in 2020 and fiscal strength will continue to erode in the absence of significant new fiscal measures and reforms,” said Alexander Perjessy, a Moody’s Vice President – Senior Analyst.
“This will be exacerbated by existing commitments to limit oil production, which will reduce government revenue,” Perjessy added.
The ratings agency expects a further gradual erosion in GCC credit metrics as oil prices remain moderate over the medium-term. It also pointed that lower oil revenue available to fund government spending will constrain growth in the non-oil sector which will, in turn, discourage governments from undertaking more fiscal tightening.
Moody’s sees the region’s geopolitical risk as higher and broader in nature than in the past, amid ongoing tensions between the United States and Iran.
Moody’s: 3 factors behind GCC sovereigns’ 2020 negative outlook
GCC’s geopolitical risk is higher in nature than in the past.
By Staff Writer, Mubasher
Moody’s Investors Service explained the factors which led to the negative outlook for sovereign creditworthiness in the Gulf area for the year 2020.
A recent report by Moody’s showed that the slowdown in the development of fiscal reforms at a time of reasonable oil prices contributed to the outlook, along with weak growth and higher geopolitical risk.
Further gradual erosion in GCC credit metrics is expected by Moody’s which relied in their outlook on the moderate oil prices over the medium-term.
Moody’s vice president – senior analyst, Alexander Perjessy, highlighted: “The pace of fiscal consolidation will remain slow in the GCC in 2020 and fiscal strength will continue to erode in the absence of significant new fiscal measures and reforms.”
Perjessy added, “This will be exacerbated by existing commitments to limit oil production, which will reduce government revenue.”
Growth in the non-oil sector will be constrained by lower oil revenue available to fund government spending; this will discourage governments from undertaking additional fiscal tightening.
Moody’s noted that “the region’s geopolitical risk is higher and broader in nature than in the past amid ongoing tensions between the US and Iran.”
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