By Andy Sambidge
Report says major infrastructure projects continue to be built despite downturn.
Saudi Arabia's construction is seen growing by nearly three percent as major infrastructure projects continue to be built in the kingdom despite the impact of the global downturn.
A new report by Business Monitor International says real growth in the sector is predicted to be 2.88 percent compared to 2008 with the construction industry worth SR77.69bn ($20.74bn) by the end of the year.
BMI’s Q1 2010 Saudi Arabia Infrastructure Report said: "Risks continue to be to the upside for our forecasts for this year and through to 2010.
"This is due to the Saudi government’s decision that it will support infrastructure projects that it deems too important to fail in the event that they encounter problems with financing."
Last week, it was reported that construction work had started on a new metro rail system for Riyadh.
The report highlighted the Ras Al Zour water and power plant (IWPP) as a prime example of this, adding that when the consortium awarded the contract fell into financing issues, the government decided it would take over funding for the project.
The government also stepped in when the $7bn Saudi Landbridge rail project stalled due to the financial crisis, the report added.
BMI said it saw Saudi Arabia’s ambitious rail plans fuelling activity in the infrastructure sector, with $30bn worth of contracts under way or at the bidding stage.
"Despite this activity, as has been the case over the past few quarters, out forecasts have been dampened to some extent by high levels of inflation in the country," the report added.
Nominal growth in the construction industry is estimated close to double digits but inflation has negated this in real terms.