By Beatrice Thomas
Following the global economic crisis, kingdom's non-residential construction has increased, with focus on infrastructure-related projects
Saudi bank credit for construction activities will continue to grow into 2014, according to a new National Commercial Bank report.
The report, entitled Government and Private Financing Accelerate the Execution of Infrastructure Projects, said money being invested into infrastructure projects will encourage commercial banks to increase their lending to construction contractors, the Saudi Gazette reported.
With many mega-projects in the pipeline, bank lending will play a critical role in the growth of the sector, it said.
The report said the emergence of sukuk and Public Private Partnerships had also given both government and private entities the ability to diversify their financial exposure, while still hedging against project risk.
It said following the global economic crisis the push for non-residential construction significantly grew from five percent of nominal gross domestic product (GDP) in 2006 to an estimated six percent in 2013.
However, it said Gross Fixed Capital Formation (GFCF) is expected to increase its share of GDP over the medium-term as the injection of SR250bn ($66.66bn) into the housing market will have a lasting impact on the economy.
The report said the value of awarded contracts in the construction sector between 2008 and the third quarter of 2013 reached a staggering SR1.2 trillion, of which 68 percent, or SR805bn, was spent on infrastructure-related projects.
The breakdown of the expenditure between 2008 and Q3 2013 revealed that the power sector accounted for 29 percent of the total contract awards for infrastructure related projects. The transportation sector came in second with 22 percent, followed by the residential real estate sector with 12 percent.