The low price of oil, and therefore government revenue, remains the single most important factor affecting current and future investment decisions for growth, particularly in the Emirate of Abu Dhabi. Growth is steady but subdued at 2.3 percent for 2016, below the recent average.
2016 saw construction value in the Gulf down by nearly a third on 2015, the worst year since before the global financial crisis. 2017 should see an upturn in awards of retail projects in Dubai, including Dubai Creek Harbour and Mall of the World.
A potential headwind for retail, however, is the weakening of sterling following Brexit and Russian sanctions, with tourism set to take a hit as Russian and British tourists find their budgets constrained.
The UAE construction market is facing pressure from cuts in government spending and the proposed introduction of VAT in 2018, which will impact the supply of goods and services, but finances will improve should oil prices start to rise again.
The Expo 2020 Dubai is expected to have an influence on construction tender prices in 2017, with a number of projects expected to be awarded. This is expected to result in a high demand for tier one and tier two contractors and higher tender prices.