So now we know: the Middle East is not immune to the effects of the global financial whirlwind after all. The question is, can we ride out the storm?

With the benefit of hindsight, we probably should have seen it coming. As Mishal Kanoo says in the current issue of MENA Infrastructure, you can’t watch some of the largest financial institutions in the world go to the wall and not expect there to be repercussions at some point for your own business, no matter how well insulated you think you are. The global recession has finally hit the Middle East with a bang, and companies everywhere are feeling the effects.

For the region’s previously booming construction sector, this has meant job cuts, project delays and a slump in the property market. It has meant capital investment is now harder to find. And it has also meant that developments that at one time looked like having cast-iron returns have now been shelved until the market picks up again. From suppliers to contractors to developers to investors, the entire construction value chain has taken a hit as the region takes stock.

It’s not all doom and gloom, however. Demand for essential infrastructure works remains strong, and local leaders are willing to spend big money to meet those needs. High oil prices over recent years mean regional governments have accrued significant cash reserves, which they are ready to use to stimulate their economies by reinvesting in infrastructure work.

For example, National Bank of Kuwait estimates that some US$1.1 trillion worth of projects are either now underway or in the advanced stages of planning, with GCC countries expected to shell out close to $70 billion on energy projects this year alone. Demand for roads, bridges, hospitals and schools remains high. Chronic housing shortages for middle and lower income customers across the region could also provide opportunities for developers struggling in the over-supplied luxury property markets. Meanwhile falling raw materials costs should ease supply constraints and could even see some previously mothballed projects rematerialise.

Accordingly, although the pace of implementation is likely to slow significantly, major infrastructure and capital expenditure projects should still form the backbone of the GCC economy for the foreseeable future, at least.

So what does this mean for the construction industry as a whole? Firstly, that developers will need to rethink their plans and assess whether or not they meet current market needs. And secondly, that with the contraction in project financing, gaining access to government-backed projects will be a key survival strategy for many firms.

More importantly, it could provide the opportunity to develop much-needed social infrastructure that, in the rush to build the next iconic tourist destination, has often been overlooked. If that is the case, then there might be a silver lining to those storm clouds after all.