UAE Quarterly Update - April 2019

The UAE economy grew 1.7% in 2018 influenced by higher oil prices but fell well short of expectations, whilst the UAE’s economy is still growing albeit at a slowing pace; the UAE’s real GDP growth is still projected to reach 3.7% by 2020 with inflation remaining low.

This is supported by the latest Ernst & Young independent report that suggests that EXPO 2020 could generate an additional equivalent of 1.5% to the UAE GDP within the peak six month period of the exhibition.

The UAE Tender Price Index is AECOM’s assessment of construction tender prices in the UAE. It is compiled by AECOM’s Middle East Business Intelligence team based on actual returns of projects. It is based on new build and refurbishment projects across a variety of construction sectors and covers all emirates of the UAE.

The Index is therefore a measure of average price increases across differing project types and locations. It should be regarded as a guide only when looking at any specific project, as the pricing of individual projects will vary depending on such factors as their complexity, location, timescale, etc. The relative cost of construction in the Middle East is based on typical build costs in USD. High and low cost factors for each building type have been calculated relative to the UAE (Dubai), where average costs equal 100. The relative cost bars plotted in the chart represent the average high and low cost factor for each location, based on the costs of the buildings included in the sample (excluding commercial fit-outs).

AECOM’s TPI is forecasted to see a considerably subdued growth in 2019 with an expected 0.1% increase in the tender price index for the full year. Noting that AECOM’s TPI increased 3.92% during 2017, and 0.94% during 2018, it appears to have captured the cost increases that have been evident during 2017-2018, as tenderers, suppliers and sub-contractors priced foreseeable material price increases in relation to Oil, Steel and VAT.