00:00Really interesting research note that you put out on the GCC project markets and just bringing out a couple of numbers that stood out to me the value of schemes and the execution phase is around 2.1 trillion dollars. You're saying that that's a record high equivalent to 90 percent of GCC's GDP. I mean it to me it really still speaks to a region that is growing.
00:20Yeah even the GCC 2.1 trillion dollars that's real money and there is momentum running through this capital spending cycle that's been building really since the end of COVID and what's striking for us is the contrast between the capital aspirations here and the more downbeat investment plans that there are elsewhere in the world whether that's in developed markets or in emerging markets but also that sense yes that after a very strong four or five years the spending cycle isn't slowing but I think it is maturing.
00:49CapEx is still up but perhaps not up by quite as much as it was in previous years.
00:53And what are the signs that it's maturing? Is it just simply that we're growing but at a slower pace than we were before?
00:57Yeah there's an element of law of big numbers here as a pie gets bigger it's harder you don't get expansion at the same kind of pace but again there was that really big rebound post-COVID which is still there the numbers still show me momentum but perhaps a little less than there was before and also a real divergence between different parts of the region as well.
01:16Yeah we'll get there but let me just ask you what are the main sectors that are exhibiting this growth?
01:21A lot of it is still orientated towards real estate building building out of residential space or office space or health space as well but I'm also seeing more money going towards infrastructure more money going to the power sector as well and a real focus on renewable energy in some parts of the region too.
01:34I was going to say what about digital infrastructure? Are you seeing more growth in that in the last couple of years?
01:40It's certainly there in the aspirations and we're a bit behind the cycle here in the Gulf compared to some other parts of the world but no any policy announcement you listen to from pretty much any big policy maker anywhere in the regions are all focused around that build out in digital capacity.
01:56So I think people will have a lot of questions specifically about the kingdom of Saudi Arabia given we've we talk so much macro about the reprioritization the recalibration of projects that are underway according to your research the value of new contract signs is down by almost a third enrolling 12 months terms.
02:13So is this just a direct reaction to what they're trying to do at a macro budget level that we've been hearing about that discussion for a long time been waiting to see it in the in the data I'm beginning to see that that softening and not in the amount of work which is actually underway the level of execution inside the capital project has been rolled out.
02:32Now they're still worth a huge amount of money but I'm looking for momentum.
02:35What I'm really tracking is the pace at which new contracts have been signed and yes the data we see does suggest that finally that you call new contract work is beginning to slow.
02:45Yeah. And what impact you see and this is unrelated to report but ultimately how do you see that affecting the public finances that we spend a lot of time scrutinizing.
02:54I guess there's two bits to it in terms of the levels of GDP growth that we're expecting I'm not making any changes to my forecast I'm looking for a non-all economy growing around 4% and this year next year and in 2027 as well and capital spending is clearly a big part of that.
03:10My forecast for Saudi public finances I'm running with all price of $65 a barrel for next year and 2027 some pick up in production which gives revenues a bit of a bit of a lift a deficit comes through.
03:22That's sort of 4% of GDP so maybe a little higher this year maybe a little lower next year.
03:28That's a significant sum but there's a sum that a country as wealthy as Saudi can carry.
03:31Yeah I guess it's interesting because even though the pace of new projects has started to slow down and there has been this recalibration why are we not seeing more of an impact on Saudi Arabia's growth trajectory.
03:43I think there's always a limit to Saudi Arabia's absorptive capacity there's only so much new capital you can put to work at any one time and perhaps I've just been a little more cautious.
03:52than some on the pace at which that investment spending was likely to be to be rolled out but the pick up in capex the percentage of GDP that's very clearly there I think Saudi is operating at potential.
04:03Yeah okay one other thing that stood out to me from your report Qatar has regained some momentum but more than half of the project work is concentrated in the oil and gas sector.
04:13So it does not speak to a country that's investing a lot in diversification or as much as the other countries.
04:19There is there is definitely a split across the GCC region a little bit of a slowdown a new contract work in Saudi Arabia UAE now that project market is still growing very very quickly.
04:29Other parts of the region for sure there is more modest increases in capital spending.
04:34That's definitely the case in Qatar we're off the we're off the lows but we all know about the big increase in capital formation that was ahead of the World Cup and since then we had expected to see new investment to the not all sector and slow and that's what the data is showing us.
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