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
  • Amazon data centre hit highlights sector vulnerabilities

    2 March 2026

     

    Amid ongoing Iranian missile and drone attacks on GCC states, US cloud provider Amazon Web Services (AWS) has reported service outages following separate incidents at two of its UAE data centres.

    “At around 4.30AM PST [16.30 UAE time on 1 March], one of our Availability Zones (mec1-az2) was impacted by objects that struck the data centre, creating sparks and fire,” AWS said in an operational update on 1 March.

    At 10.46 UAE time on 2 March, the company announced a further update, saying that another of its three UAE Availability Zones had gone down.

    “We can confirm that a localised power issue has affected another Availability Zone in the ME-CENTRAL-1 Region (mec1-az3),” it said in the latest update. “Customers are also experiencing increased EC2 APIs and instance launch errors for the remaining zone (mec1-az1). At this point, it is not possible to launch new instances in the region, although existing instances should not be affected in mec1-az1.

    “Other AWS services, such as DynamoDB and S3, are also experiencing significant error rates and latencies. We are actively working to restore power and connectivity, at which time we will begin to work to recover affected resources. As of this time, we expect recovery is multiple hours away.”

    Regional footprint

    The company, part of the US’ giant Amazon group, is one of the world’s largest data centre and cloud operators. It operates three data centres in the UAE – one in Dubai and two in Abu Dhabi – and provides critical IT services to government and private sector operations and systems.

    Its Availability Zones consist of infrastructure in separate geographic locations, spaced far enough apart to significantly reduce the risk of a single event affecting customers’ business continuity, yet near enough to provide low latency for high-availability applications that use multiple zones.

    The targeting of the two data centres – and potentially others if the conflict continues – highlights the strategic importance of these types of facilities. The AWS attacks are believed to be the first time a data centre has been targeted in a conflict and are likely to drive a reconfiguration of future campus designs to account for similar risks.

    Such changes could include increased redundancies – particularly in power provision – enhanced structural resilience, and potentially a reconsideration of the location and clustering of data centre facilities.

    WATCH: Ed James explores the rapidly evolving GCC data centres market

    Historically, data centres in the region were largely smaller enterprise facilities dedicated to storage services for organisations such as banks. Their locations were often confidential and in areas that were difficult to target, making them harder to disrupt.

    However, the emergence of large in-region hyperscale data centres – with IT loads of 200MW or more and larger physical footprints – may necessitate a rethink of how such infrastructure is delivered, not just in the GCC but worldwide.

    According to MEED Projects data, there are believed to be about 185 data centres in the region, each with an estimated capex investment value of more than $10m, of which about 99 are either planned or under construction.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15823937/main.gif
    Edward James
  • Contractor wins Oman water network contract

    2 March 2026

    Egypt’s Hassan Allam Construction has won an engineering, procurement and construction (EPC) contract for a water transmission network project from Al-Jardaa to Mihlaih (Sawt) in Oman’s North Al-Sharqiyah Governorate.

    The contract was awarded by Oman Water & Wastewater Services Company (OWWSC).

    The scope includes 76 kilometres of transmission lines and nearly 600km of distribution networks.

    The project also covers seven high-capacity reservoirs, two pumping stations and seven solar-powered systems.

    Hassan Allam Construction won a separate contract with OWWSC in August 2025 to build and supervise the construction of a large-scale water supply and wastewater system in Al-Amerat, Muscat.

    The Al-Amerat Catchment 10 water supply, sewer system and treated effluent networks project covers the construction of a 64km gravity sewer network.

    Last month, MEED exclusively revealed that China’s Hunan Installation Overseas Engineering had won an EPC contract to build water supply and sewage networks in Muscat. 

    The contract was awarded by state utility Nama Water Services (NWS).

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15823693/main.jpg
    Mark Dowdall
  • RTA opens bridge as part of Trade Centre road project

    2 March 2026

    Dubai’s Roads & Transport Authority (RTA) has opened a key bridge as part of the World Trade Centre roundabout project.

    Extending 1 kilometre (km) from Sheikh Zayed Road to Sheikh Khalifa Bin Zayed Street towards Deira, the bridge has a capacity of 3,000 vehicles an hour.

    It comprises two lanes, reducing journey time from six minutes to one minute.

    In a statement, the RTA said overall project construction progress has reached 60%.

    The project’s main construction works are being undertaken by the local firm Wade Adams, which was awarded a AED696m ($189m) contract to upgrade the Trade Centre roundabout in October 2024.

    The project will enhance connections between Sheikh Zayed Road and five main streets: Sheikh Khalifa Bin Zayed Street, Sheikh Rashid Street, 2nd December Street, Zabeel Palace Street and Al-Mustaqbal Street.

    The project’s scope covers the construction of five bridges spanning a total length of 5km. 

    In addition to the recently opened bridge, two other two-lane bridges will extend 2km and will connect Sheikh Rashid Street with 2nd December Street, with a capacity of 6,000 vehicles an hour.

    The fourth and fifth two-lane bridges will span 2km from Al-Majles Street to 2nd December Street and will connect Al-Mustaqbal Street with 2nd December Street, with a capacity of 6,000 vehicles an hour.

    The scope also covers converting the existing roundabout into a surface intersection to improve the flow of traffic inbound from Sheikh Zayed Road to 2nd December Street and of southbound traffic from Al-Mustaqbal Street to Sheikh Zayed Road.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15823684/main.png
    Yasir Iqbal
  • Riyadh selects three teams for King Salman airport ECI

    2 March 2026

     

    Saudi Arabia’s King Salman International Airport Development Company (KSIADC) has selected three groups for the construction of Terminal 6 at King Salman International airport (KSIA) in Riyadh.

    KSIADC, which is backed by Saudi sovereign wealth vehicle, the Public Investment Fund, will deliver the project on an early contractor involvement (ECI) basis.

    The selected groups include:

    • UCC / CCC (Qatar/Greece)
    • Al-Gihaz Holding / TAV / WeBuild (local/Turkiye/Italy)
    • PowerChina / MBL (China/local)

    MEED understands that the ECI timeframe will be around six months.

    The ECI process requires selected contractors to submit methodologies for the project and a design proposal. One team will then be selected for the construction.

    In November last year, MEED exclusively reported that KSIADC was targeting mid-2026 to award the contract for the construction of Terminal 6 at KSIA in Riyadh.

    In July last year, MEED exclusively reported that several contractor consortiums had submitted proposals for a contract to develop the first phase of Terminal 6 and the Iconic Terminal at KSIA.

    MEED reported in May last year that US firm Bechtel Corporation had been appointed as the delivery partner for the terminals at KSIA.

    According to local media reports, KSIADC’s acting CEO, Marco Mejia, said the project developer had completed the project’s masterplan.

    The reports added that Terminal 6 will boost the airport’s capacity by 40 million passengers.

    The project is expected to be delivered before the start of the Expo 2030 Riyadh event.

    Project scale

    The project covers an area of about 57 square kilometres (sq km), allowing for six parallel runways, and will include the existing terminals at King Khalid International airport. It will also include 12 sq km of airport support facilities, residential and recreational facilities, retail outlets and other logistics real estate.

    If the project is completed on time in 2030, it will become the world’s largest operating airport in terms of passenger capacity, according to UK analytics firm GlobalData.

    The airport aims to accommodate up to 120 million passengers by 2030 and 185 million by 2050. The goal for cargo is to process 3.5 million tonnes a year by 2050.

    Saudi Arabia plans to invest $100bn in its aviation sector. Riyadh’s Saudi Aviation Strategy, announced by the General Authority of Civil Aviation, aims to triple Saudi Arabia’s annual passenger traffic to 330 million travellers by 2030.

    It also aims to increase air cargo traffic to 4.5 million tonnes and raise the country’s total air connections to more than 250 destinations.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15823432/main.jpg
    Yasir Iqbal
  • Petrofac cuts staff in Libya and puts oil project on hold

    2 March 2026

     

    The financially troubled engineering company Petrofac has cut its staff in Libya and stopped work on a key oil project in the country, according to industry sources.

    Between 15 and 20 Libyan members of staff have been released by the company, and work on a project to develop the Erawin oil field has been paused, sources said.

    Petrofac secured a contract with Zallaf Libya Oil & Gas Exploration & Production Company to deliver its Erawin field development project phase 1 early production facilities (EPF) in September 2021.

    The project’s scope of work encompassed surface equipment, including well pads and flowlines, at the Erawin oil field.

    It also included a pipeline to transport crude oil approximately 100 kilometres (km) to the El-Sharara oil field, along with a control room, substation and telecom system located there.

    In a statement to MEED, Petrofac said:

    “Petrofac has not exited Libya. Our Tripoli office remains operational and we continue to maintain an active presence in the country.

    “Regarding the Erawin project, the pipeline infrastructure was completed and has been in operation for more than a year.

    “A small number of remaining activities were paused while we continue discussions with the client on the project’s final scope and close‑out arrangements.

    “Petrofac has not abandoned the project, nor have we shut down our operations in Libya.”

    Commenting on the cut to employee numbers in Libya, the company said:

    “Recent workforce adjustments reflect the normal lifecycle of a project.”

    The company added: “Libya remains an important market for Petrofac, and we remain committed to supporting the development of the country’s energy sector.

    “As discussions with the client are ongoing, we are not in a position to comment further at this time.”

    Zallaf Libya Oil & Gas Exploration & Production Company was established in Libya in 2013 and is wholly owned by Libya’s National Oil Corporation.

    It awarded the Erawin EPF contract to Petrofac using the engineering, procurement, construction and commissioning (EPCC) contract model.

    In a statement in 2021, Petrofac said the contract was valued at over $100m, but did not give a precise figure.

    The regional project-tracking service MEED Projects has estimated that the contract was worth $440m.

    Petrofac problems

    On 27 October last year, Petrofac announced that it had applied to appoint administrators, a move that potentially put thousands of jobs at risk and increased uncertainty for projects worth billions of dollars in the Middle East and North Africa (Mena) region.

    At the time, the total value of projects awarded to Petrofac and under construction in the region was $5.83bn, according to information recorded by MEED Projects.

    Petrofac also had bids under evaluation for 15 projects in the region worth a total of $19.28bn.

    Since then, key parts of the business have been sold off, and many of the company’s staff have been made redundant.

    The redundancies included around 180 employees who were issued termination notices in October last year.

    In December, the US-based company CB&I announced it had entered into a deal to buy Petrofac’s asset solutions business in the first quarter of 2026.

    In January this year, the proposed company voluntary arrangement (CVA) related to the sale of its Asset Solutions business was approved.

    Erawin exports

    Libya shipped its first cargo of crude from the Erawin oil field in November 2023.

    The shipment departed from Libya’s Zawiyah port and consisted of 600,000 barrels of crude.

    Australia-based Worley Parsons was appointed as the front-end engineering and design (feed) contractor for the EPF project in 2019.

    The Erawin field development project is located about 800km south of Tripoli and 100km southwest of the El-Sharara field.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15821861/main.jpg
    Wil Crisp