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Project activity in Kuwait picked up pace in the final quarter of 2022 after a lacklustre third quarter, but the total value of contracts awarded remained low compared to 12 months earlier.
The Gulf state’s project market, which saw record falls in deals activity for the most part of 2021 due to several factors including high costs and supply-chain issues, will continue to recover this year on the back of high oil prices, solid economic growth and slower interest rate increases, according to National Bank of Kuwait (NBK) research.
Like its Gulf neighbours, Kuwait is looking to diversify its economy from oil through the implementation of National Vision 2035, which seeks to transform Kuwait into a major commercial and financial hub.
According to the bank’s report, businesses and other entities in Kuwait awarded deals worth KD383 million ($1.25 billion) during the last three months of 2022, up by 688% from a near 20-year low in the third quarter.
However, the value of deals awarded in the final quarter of the year was still down 32.5% when compared to the same period in 2021.
The bank said project activity last year was marred by legislative delays, supply-chain disruptions and higher labor and materials costs.
From January to December 2022, the total value of awarded projects came in at KD832 million, also down by 46.6% compared to a year ago. The value was the second lowest full-year outcome since 2005, NBK said.
“[But] looking ahead, high oil prices, solid economic growth, slowing interest rate rises and the government’s commitment to infrastructure development as per its draft ‘Plan of Action’ and longer-term Vision 2035 strategy could help sustain the recovery in the projects market,” NBK said.
The International Monetary Fund (IMF) said in December that Kuwait’s overall real gross domestic product (GDP) could further increase to above 8% in 2022. The growth will be supported by higher oil production, oil price increases and a sustained improvement in domestic demand.
Top sectors
During the last quarter of 2022, the construction sector led the project awards in Kuwait, accounting for 52% of the deals.
The total value of construction awards in 2022 also dropped by 67% year-on-year to KD252 million. The sector is expected to see increased activity in 2023, as there are several projects due to be awarded in the first half of the year.
Due to be awarded this year are the Council of Ministers’ Development of Four Sites project at Sheikh Jaber Al-Ahmad Al-Sabah Causeway, estimated to cost KD165 million, and phase 2.2 of Kuwait Oil Company’s Mina Al-Ahmadi Township Redevelopment, valued at KD129 million.
The transport sector emerged as the best performer last year, with KD321 million worth of contracts awarded. Overall activity in the sector, however, declined in the fourth quarter by 46% compared to three months earlier.
“Looking ahead, the overall strong performance could continue well into 2023 based on a solid pipeline of road infrastructure projects including the Crossroads for New Passengers Terminal 2 at Al-Muqawa Road project (KD 120 million) and the Regional Road South Part Project: Central Section (KD129 million), expected in [the first and second quarter, respectively),” NBK said.
Within the utility sector, the value of power and water project awards rose by 6% year-on-year to KD65 million. But the total value of deals for the whole year, pegged at KD 148 million, was still down 32% compared to 2021.
In the oil and gas sector, which saw muted activity in the first nine months of 2021, total awards reached KD112 million in 2022.
NBK said the sector is set to recover this year, with around KD500 million contracts likely to be awarded, mainly on Kuwait Oil Company’s KD210 million project to “debottleneck” gathering centres in East Kuwait.
(Reporting by Cleofe Maceda; editing by Seban Scaria)
