Construction Labor Meltdown: Skilled workers exit, wages soar

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KUWAIT CITY, Oct 4: Local banks’ financing to the construction sector in Kuwait experienced a 2.14 percent decline during the first eight months of 2023, dropping from 1.154 billion dinars in the same period of 2022 to 1.13 billion dinars this year. According to the Central Bank of Kuwait’s monthly statistics for August, construction financing saw a 2.6 percent increase on a monthly basis, reaching 162.5 million dinars, up from 158.3 million dinars in July. On an annual basis, it surged by a remarkable 151.5 percent, climbing to 97.9 million dinars compared to 64.6 million dinars in August 2022.

This dip in construction financing coincides with a 93.1 million dinar decrease in new credit facilities across all sectors during the first eight months of 2023, representing a 0.6 percent decline from 15.76 billion dinars in the same period of 2022 to 15.669 billion dinars this year. In August, new credit for all sectors increased by 3.2 percent, amounting to about 63.6 million dinars, although it had decreased from 1.948 billion dinars in July to 2.012 billion dinars in August. Nonetheless, it showed positive growth compared to the 1.354 billion dinars recorded at the end of August 2022.

Looking back at 2022, construction financing experienced a substantial 57.4 percent increase, reaching a total of 1.741 billion dinars, compared to 1.105 billion dinars in 2021. In 2023, it exhibited fluctuations, rising from 112.8 million dinars in December to 118.2 million dinars in January, 147.1 million dinars in February, peaking at 217.9 million dinars in March, and then decreasing to 92.1 million dinars in April. However, it rebounded in May to 110.1 million dinars and further increased to 123.9 million dinars in June and 158.3 million dinars in July.

The accumulated balance of construction financing provided by local banks witnessed an impressive annual increase of 14.9 percent, surging from 2.147 billion dinars in August 2022 to 2.467 billion dinars in August 2023, reaching its highest level in two years. Furthermore, this balance increased by 7.8 percent and approximately 179 percent from the beginning of 2023, after standing at 2.288 billion dinars at the end of December 2022. In July, it recorded a 2.2 percent increase of 52.9 million dinars from the end of December 2022, when it was 2.415 billion dinars.

Kuwait’s construction sector faces numerous challenges, including a decrease in project offerings, contract signings, and government payments over the last five years. Additionally, the sector grapples with escalating construction costs due to a labor shortage, resulting in unprecedented wage hikes. This has negatively impacted housing plot costs, placing an increased financial burden on citizens, especially in the face of rising building material prices.

The labor shortage issue extends beyond quantity to encompass quality, with experienced workers leaving the real estate market in large numbers over the past two years. This exodus was triggered by government decisions to restructure the population, following the COVID-19 pandemic. Consequently, daily wages for construction workers have more than tripled, rising from 10 dinars before the pandemic to 30 dinars presently.

The Real Estate and Public Projects Committee of the Kuwait Chamber of Commerce and Industry has called for solutions to the challenges faced by the contracting sector. These include addressing delays in payment collection from the state, delays in project awards and contract signings, and issues related to material and labor supply, as well as contract imbalances with the state, resulting in additional costs for contractors. Resolving these obstacles would not only benefit the completion of projects but also accelerate their progress, benefiting both the public and private sectors.

By Ahmad Fathi
Al-Seyassah/Arab Times Staff

This news has been read 15904 times!

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