Recent data from the Central Bank of Kuwait highlighted the sector’s financial challenges
Dubai: Kuwait’s construction sector is grappling with a series of challenges, including a sharp decline in project launches, delayed payments to contractors, and rising construction costs driven by a labor shortage, industry experts and financial data reveal.
Over the past five years, the sector has seen a significant drop in the awarding of new projects and the signing of contracts. Compounding these issues are delays in payments owed to contractors, which have strained cash flows and hindered progress on existing projects.
One of the most pressing concerns is the labor shortage, which has led to an unprecedented rise in wages. Real estate experts note that the shortage is not just about the number of workers but also the quality of labor.
Over the past two years, following the end of the COVID-19 pandemic, the market has lost a significant number of experienced workers, further exacerbating the crisis.
Recent data from the Central Bank of Kuwait highlights the sector’s financial challenges. In December 2024, local banks’ financing for the construction sector decreased by 12.1 percent month-on-month, dropping to 445.5 million Kuwaiti dinars (KD) from 507.3 million KD in November.
However, on an annual basis, financing increased by 90.3 percent, reaching 445.5 million KD compared to 234.1 million KD in December 2023.
The total financing provided by banks to the construction sector in 2024 amounted to approximately 3.86 billion KD.
The accumulated balance of construction financing declined by 6.8 percent month-on-month, falling to 2.840 billion KD in December from 3.048 billion KD in November. Yet, on an annual basis, the balance rose by 10.1 percent compared to December 2023.
In 2023, the total financing provided by local banks to the construction sector reached 1.754 billion KD, a slight increase of 0.7 percent from 1.740 billion KD in 2022.
While the construction sector faces headwinds, Kuwait’s banking sector has shown resilience. Deposits in local banks, including both resident and non-resident accounts, increased by 1.5 percent in 2024, reaching 53.823 billion KD by the end of December, up from 53 billion KD in December 2023.
Government deposits grew by approximately 390 million KD, totaling 5.083 billion KD by the end of 2024, while private sector deposits rose by 795 million KD to 41.485 billion KD.
Additionally, bank credit facilities for economic sectors expanded by 3.6 billion KD in 2024, reaching 57.17 billion KD by year-end.
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