meed-logo

line1 line2 line3
SIGN IN / REGISTER

Riyadh prioritises stability over headline growth

28 September 2023

MEED's October 2023 special report on Saudi Arabia also includes: 

> POLITICS: Saudi Arabia looks both east and west
> GIGAPROJECTS: Gigaproject activity enters full swing
> TRANSPORT: Infrastructure projects support Riyadh’s logistics ambitions
> UPSTREAM: Aramco focuses on upstream capacity building
> DOWNSTREAM: Saudi chemical and downstream projects in motion
> POWER: Riyadh rides power projects surge
> WATER: Saudi water projects momentum holds steady
> BANKS: Saudi banks track more modest growth path
> SPORT: Saudi Arabia’s football vision goes global
> JEDDAH TOWER: Jeddah developer restarts world’s tallest tower

 

As 2023 heads towards its final quarter, Saudi Arabia has elected to continue to pursue further voluntary Opec+ oil production cuts, supporting oil prices at the expense of its own immediate GDP growth.

On 5 September, Riyadh confirmed its intention to roll over its additional 1 million barrels a day (b/d) of production cuts until the end of the fourth quarter. Analysts had largely expected Saudi Arabia to extend the cuts with a view to further tightening oil markets, and the price of Brent crude broke the $90-a-barrel mark and reached its highest point in 10 months shortly after the cut extension was announced.

Despite the rise in prices, Saudi Arabia’s ongoing oil production restraint will ensure no improvement is likely to be made on its modest mid-year real GDP growth forecasts.

In July, the Washington-based IMF lowered its projection for Saudi Arabia’s economic growth to 1.9 per cent, down from an earlier forecast of 3.1 per cent in April – and compared to an 8.7 per cent growth figure for 2022, which saw oil reach highs of up to $124 a barrel and the kingdom’s first fiscal surplus in nearly a decade.

The country also entered a technical recession in the second quarter after its economy contracted for its second successive quarter in a row – shrinking by 0.1 per cent after a contraction of 1.4 per cent in the first quarter, according to estimates from the General Authority for Statistics (Gastat). This resulted in a slowing of year-on-year growth to 3.8 per cent in the first quarter and 1.1 per cent in the second.

There is now a risk that the Saudi economy could see an overall contraction for 2023. The further three months of production cuts will translate into a 9 per cent overall fall in production in 2023, the largest drop in 15 years, according to Khalij Economics.

Non-oil growth

Despite the disappointing headline GDP growth figures and projections, however, Saudi Arabia is maintaining a robust non-oil growth rate.

The non-oil economy is estimated to have grown 5.5 per cent year-on-year in the second quarter of 2023, according to Gastat, while oil sector growth declined by 4.2 per cent. Private sector growth for the quarter has been estimated to be even higher, at about 6.1 per cent.

At the same time, the Riyad Bank Saudi Arabia purchasing managers’ index (PMI) settled to an 11-month low of 56.6 in August 2023, down from 57.7 in July, reflecting a moderation of non-oil activity. It was the second stepdown in two months for the index from a multi-year high for new business in June.

The headline PMI figures remain deeply positive, however, with the index well above the 50 mark that delineates growth from contraction. 

The index also saw the rate of job creation pick up further in August amid sustained new business growth. This reflects a continuation of a job creation trend in the country that has seen unemployment fall from 9 per cent during the Covid-19 pandemic to 4.8 per cent at the end of 2022. Meanwhile, youth unemployment has been halved over the past two years to 16.8 per cent in 2022.

On the flipside, input cost inflation accelerated to its fastest rate in over a year due to a sharper uptick in purchase prices, though selling prices partially compensated for this by also rising. Business confidence nevertheless slid to the lowest level since June 2020 over concerns of rising market competition.

Project performance

The kingdom’s non-oil sector should continue to be well supported by Saudi Arabia’s infrastructure and project spending plans. These schemes remain affordable thanks to the kingdom’s broad financial reserves and buffers.

As of mid-September, Saudi Arabia’s project spending for 2023 had already all but matched that of 2022, with contract awards in the kingdom approaching the $57bn mark – last year’s figure – but with three and a half months still left to run. 

This is the third straight year with project awards of around $55bn or more. This is a 75 per cent increase in spending compared to the period from 2016 to 2020, which witnessed an average of only slightly more than $30bn in awards each year.

There is a further $50bn-worth of project work in bid evaluation and expected to be awarded this year. Even accommodating the possibility of delays for much of this work, the award of even a modest portion of this would make 2023 by far the strongest year on record for project awards in Saudi Arabia.

This heightened level of projects activity is as much due to above-average spending on oil and gas infrastructure, amid a spree of investment by Saudi Aramco in the optimisation of its core assets, as it is to the kingdom’s gigaproject programme. 

Oil and gas project awards alone have exceeded $21bn in 2023 to date and could readily be on track to beat the previous award high of $24.7bn seen in 2019.

It is the construction and transport sector that has the furthest to go to outdo itself in the last quarter of 2023. 

Awards in the sector to date have hit $24.6bn, whereas awards in 2022 reached $34.7bn – so there is a $10.1bn gap to bridge to beat last year’s performance. This is not unrealistic given the $14.2bn-worth of projects in the sector under bid evaluation, and especially given the backing of the Public Investment Fund for the kingdom’s gigaprojects and other Vision 2030 schemes.

Overall, the ongoing upsurge in projects activity should continue to prove supportive of the non-oil economy, regardless of either the vicissitudes of the oil price or Saudi Arabia’s moderation of its own oil production.

https://image.digitalinsightresearch.in/uploads/NewsArticle/11153290/main.gif
John Bambridge

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Jordan starts international stadium construction works

    18 June 2026

    Register for MEED’s 14-day trial access 

    Jordan has started preliminary excavation and site preparation work at its Al-Hussein Bin Abdullah II International Stadium, located east of the capital city of Amman.

    The project is part of the first phase of the Amra City development master plan.

    The development is being implemented by Jordan Cities & Facilities Development Company, a Jordan Investment Fund-owned company.

    The main works are expected to begin early next year, with the stadium slated for completion in 2029.

    The project will cover an area of about 1 million square metres and the stadium will have a capacity of 50,000 spectators.

    The stadium is being built within the Amra City development, which is located about 40 kilometres (km) from downtown Amman and 35km from Zarqa City and Queen Alia International airport.

    The project forms part of Jordan's Economic Modernisation Vision (EMV) 2023-25.

    The EMV – Amman’s flagship reform programme – aims to increase real income per capita by an average of 3% annually, create 1 million jobs, and more than double the country’s GDP over the next decade.

    The strategy envisages a leading role for the private sector, which is expected to account for 73% of the estimated $58.8bn investment required.

    To achieve these targets, a substantial pipeline of public-private partnership (PPP) projects is planned in sectors including water desalination, school construction, clean energy, green hydrogen, transport and road infrastructure.

    Last year, the PPP unit at the Investment Ministry said it was targeting seven key PPP projects in 2025.

    READ THE JUNE 2026 MEED BUSINESS REVIEW – click here to view PDF

    GCC looks beyond the Strait; Iraq’s reform window narrows as fiscal assumptions shatter; MEED Top 100 companies.

    Distributed to senior decision-makers in the region and around the world, the June 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/17325757/main.png
    Yasir Iqbal
  • Chinese firms win $506m Saudi housing project deals

    18 June 2026

    Register for MEED’s 14-day trial access 

    Saudi Arabia’s Municipalities & Housing Ministry has awarded contracts worth over SR1.9bn ($506m) to Chinese contractors for two residential developments in the kingdom.

    The first contract has been awarded to China Architectural Construction Corporation for the construction of 2,010 housing units at the Al-Ruba residential project in Riyadh. The contract value is SR875m ($233m).

    The other contract has been awarded to China State Construction Engineering Corporation for the Al-Rasha Al-Faisaliah residential project in Dammam. The project comprises 2,426 housing units, and the contract value is over SR1bn ($266m).

    The contracts were announced during the official visit of Majed Al-Hogail, Saudi Municipalities & Housing Minister, to China, where he also signed six memorandums of understanding (MoUs) between Saudi and Chinese firms. The MoUs aim to accelerate housing development, localise advanced construction technologies and enhance public-private sector collaboration.

    MEED reported in 2020 that Riyadh planned to oversee the development of more than 1 million homes by 2025 to meet growing demand in the kingdom.

    By 2030, the Saudi capital aims to more than double its population, from 7-8 million to 15-20 million, and to become one of the 10 wealthiest cities in the world.

    READ THE JUNE 2026 MEED BUSINESS REVIEW – click here to view PDF

    GCC looks beyond the Strait; Iraq’s reform window narrows as fiscal assumptions shatter; MEED Top 100 companies.

    Distributed to senior decision-makers in the region and around the world, the June 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/17322994/main.png
    Yasir Iqbal
  • Diriyah awards $727m Waldorf Astoria superblock deal

    17 June 2026

     

    Saudi gigaproject developer Diriyah Company has awarded a SR2.7bn ($727m) contract for the main construction works on the development’s Waldorf Astoria superblock.

    The contract was awarded to the joint venture of Hassan Allam Construction Saudi and UCC Saudi, the local branch of Qatar’s Urbacon Holding.

    The Waldorf Astoria superblock is a mixed-use development comprising a Waldorf Astoria hotel, Waldorf Astoria-branded residences, commercial and residential facilities, and office space.

    The Waldorf Astoria hotel will feature 200 keys, while the residential component will comprise 47 branded residences.

    The project is located on the Grand Boulevard South and Northern Arterial Road in the Boulevard Northwestern district at Diriyah Gate 2. 

    Diriyah Company tendered the contract in November last year, with submissions due in January, as MEED reported.

    Diriyah Company Group CEO Jerry Inzerillo said: “We are delighted to announce this latest major construction contract for the Waldorf Astoria superblock as we continue to progress at pace across the Diriyah development area. The Waldorf Astoria will be a world-class addition to our growing portfolio of globally renowned hospitality brands, further strengthening Diriyah’s appeal as a globally significant destination that offers world-class hospitality and lifestyle experiences.

    “Together with our partners, we look forward to delivering another landmark development that supports the kingdom’s Vision 2030 ambitions and contributes to the continued growth and success of Diriyah.”

    Hassan Allam, chairman and CEO of Hassan Allam Holding, said: “We are proud to support the development of one of the kingdom’s most ambitious and transformative destinations and to continue our partnership with Diriyah Company in bringing its vision to life.

    “Drawing on more than 90 years of experience across the Mena region, we remain committed to delivering the highest standards of quality and excellence on landmark projects that are helping shape the kingdom’s future.”

    Ramez Al-Khayyat, UCC Holding president and group CEO, said: “Being awarded this contract by Diriyah Company marks another important milestone in our growing partnership and reinforces our shared commitment to delivering world-class developments across the kingdom. This project builds on our ongoing collaboration in Diriyah, including the delivery of four luxury hotels and the Royal Diriyah Equestrian and Polo Club in Wadi Safar.

    “We value the opportunity to contribute once again to one of Saudi Arabia’s most ambitious and prestigious urban development destinations, supporting the vision of creating a world-class cultural, hospitality and lifestyle hub.”

    The latest award follows Diriyah Company’s award of an estimated SR730m ($195m) construction contract for civic quarter buildings within the Diriyah development to local contractor Al-Rashid Trading & Contracting Company (RTCC).

    In April, Diriyah announced a SR1.84bn ($490m) construction contract to build the Saudi Arabia Museum of Contemporary Art (SAMoCA) within the Diriyah development. The contract was awarded to a consortium of Egyptian contractor Hassan Allam Construction Saudi and Saudi Arabia’s Albawani.

    In March, Diriyah Company awarded an estimated SR2.5bn ($666m) contract to build the Pendry superblock in the DG2 area.

    The Pendry superblock includes the construction of the Pendry Hotel alongside residential and commercial assets. The package will cover 75,365 square metres and is located in the northwestern district of the DG2 area.

    The previous month, Diriyah Company also awarded a SR717m ($192m) contract for the construction of the One Hotel, located in the Diriyah Two area of the masterplan, with a gross floor area of more than 31,000 sq m.

    The Diriyah masterplan envisages the city as a cultural and lifestyle tourism destination. Located northwest of Riyadh’s city centre, it will cover 14 square kilometres and combine 300 years of history, culture and heritage with hospitality facilities.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/17287718/main.jpg
    Yasir Iqbal
  • AHS Properties acquires Shangri-La hotel for $300m

    17 June 2026

    Dubai-based real estate developer AHS Properties has announced the acquisition of the Shangri-La hotel for AED1.1bn ($300m), marking one of the largest single-asset real estate transactions in recent years.

    AHS Properties acquired the hotel from local firm Mismak Asset Management.

    The Shangri-La Hotel is a 43-storey, 200-metre tower located on Sheikh Zayed Road. Completed in 2003, it was among the first five-star hotels to open along the corridor.

    The acquisition expands AHS Properties’ portfolio, which includes AHS Tower, a Grade A commercial development on Sheikh Zayed Road, and AHS City, the company’s master-planned mixed-use community on the same corridor.

    In a statement, AHS Properties said that AHS Tower, AHS City and the Shangri-La hotel form a strategic “vertical corridor” platform, representing a significant portion of the company’s AED50bn development pipeline through the end of 2026.

    “The transaction reflects AHS Properties’ strategy of deploying capital into high-quality, supply-constrained assets,” the statement added.

    According to the Dubai Land Department, Dubai’s real estate sector recorded AED252bn in transactions in Q1 2026.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/17310101/main.jpg
    Yasir Iqbal
  • UAE moves to clear the path for recovery

    17 June 2026

    Commentary
    Colin Foreman
    Editor

    More than three months after the conflict began to disrupt business across the Gulf, the UAE is moving to resolve the technical challenges that the economy faces as it shifts towards recovery.

    The insurance gap has been a key obstacle to the recovery of aviation and tourism. Several countries continue to maintain advisories against travel to the Gulf, making it difficult or impossible for visitors to obtain conventional cover for trips to or through the region. The concern is twofold: one, becoming stranded should hostilities resume, and two, not being able to secure medical insurance. Both Emirates and Etihad have now moved to address that directly, offering insurance to passengers flying to or through their respective home hubs. The Etihad scheme, backed by DCT Abu Dhabi and underwritten by Daman, will run from July to December and covers eligible visitors for up to 15 days.

    The second area of concern is real estate. Anecdotally, buyers in sectors economically exposed to the conflict have found it increasingly difficult to obtain mortgage financing, a problem that has become especially acute at the point of handover. The recently signed partnership between Dubai Holding Real Estate and Commercial Bank of Dubai is designed to ease that pressure. The programme opens financing from the 30% construction stage once buyers have met a 50% payment threshold, giving purchasers earlier visibility of their borrowing capacity and reducing uncertainty during the off-plan purchase process.

    Taken together, the two initiatives show that the UAE is proactively addressing the technical hurdles as and when they arise. As the recovery gathers momentum, more challenges will surface. The capacity and willingness to address them as they emerge will be crucial to a meaningful recovery.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/17306586/main.jpg
    Colin Foreman