Wednesday, December 3, 2008

Construction slowdown amid global financial crisis

The second half of 2008 was not very pleasing. Global financial crisis & terror attacks are undoubtedly the highlights of the second half of 2008. Biggest names in financial sector fell in just few days and it did spread the panic in the construction industry as well. Financial institutions put a break on lending and started cutting jobs as a primary step to reduce operating costs. Many other industries followed (or misused) the trend from financial institutions and started cost cutting initiatives including axing of jobs.
It is a fact that global funding has been reduced. How ever there is a wide spread opinion that the ‘Crisis’ is over hyped.
It wont be an exaggeration, if I say Middle East is the ‘Construction Capital’ of the world (at the moment) ! The only way this region can be affected financially, is fall of oil prices.
Credit :
The above graph shows heavy drop in oil prices by atleast 65% , which directly axes the revenue of GCC countries by 65% !
Many of the leading construction companies and clients are state owned and hence the effect of this drop is clearly visible in Middle east projects.
Go through the following news articles in “ ” , which emphasise this fact.
Dubai-owned real estate developer Nakheel is delaying several of its flagship projects, including the Trump International Hotel and Tower, in addition to axing 500 jobs amid the global financial crisis, the company said late on Sunday.”
Azizi Investments, one of the Gulf’s fastest growing real estate developers, has announced it will not launch any new development projects in light of the global economic crisis.
The company's announcement follows news that Palm developer Nakheel was also considering scaling down some of its projects as the global economic downturn continues.”
 Travel has become more localised within the Middle East and North Africa (MENA) region and there is a shift away from business class use, as travellers respond to fears of a recession, according to YouGovSiraj's latest travel tracker.”
 Another indicator of recession is house rent & property rates. Most of the Middle East magazines and news papers have reported downward trend in demand of properties and housing rent rates.
Steel import price can be seen an important index of the “demand” from the construction industry. The following graph from “ ” speaks by itself :
It is noteworthy that the steel prices has come down by almost 50% in just 4 months!
I don’t think the slow down in the construction industry stay for long term, especially in Middle East, since this region is in the development phase. Countries like UAE have been seen developing fast to the living standards of rich European countries, in the past. To keep the pace of this development, they surely have to go ahead with infrastructure & industrial projects.
And, now, thatz a good news for project management professionals in the Middle East region!


  1. Everything will be okay, it's not as bad as what most people think. Do not worry about the recession. Most people don't realize how much money there is out there. During economic times like this, there is more money to be had than ever. Because of the bailouts and economy, lenders are bending over backwards to bail you out too. Believe it or not, there is people getting tons of cheap money nowdays to start businesses, buy homes, pay off debt, and more. Bailout is for YOU

  2. Yes. People are just being cautious thats all!
    Even myself is desperately waiting for the Indian stock market (which has fallen from Sensex 15000 at good times to mere 8500) to rise , so that I can recover my prime invested in mutual funds!


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