UAE Quarterly Update – Jan 2020

The UAE’s lacklustre performance continues as the region’s PMI for Q4 2019 deteriorated slightly by -0.5% comparative to Q3 2019, recording the lowest level since 2010. The IMF’s 2019 projection for the UAE remains unchanged with 1.6% growth to GDP. Considering the slowing global oil demand and rising geopolitical tensions, the IMF notes that the UAE has coped well in 2019 despite a regional and global economic slowdown. Looking forward, Emirates NBD anticipates 2.4% growth for 2020 attributed to the commencement of Expo 2020, tourism growth and the hydrocarbons sector expecting to make a positive contribution.

Emirates NBD reported economic growth of 2.1% in the first half of 2019 for Dubai in comparison to the same period in 2018. Key drivers for this movement include a sharp acceleration in growth for transport & storage along with wholesale & retail trade which accounts for 48.2% of real GDP, while other sectors including construction were growing, albeit at a subdued rate.

AECOM’s TPI forecast for January 2020 remains unchanged, it is expected that the tender price index will remain as forecasted at 0.1% 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.

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).