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
  • Kuwait extends deadline for $718m drainage tender

    24 June 2026

     

    Kuwait’s Ministry of Public Works (MPW) has extended the deadline for a major drainage tender estimated to be worth about KD222m ($718m).

    The new bid submission deadline is 19 July.

    The tender scope covers the construction of rainwater drainage networks across the residential areas of Sabah Al-Ahmad, South Sabah Al-Ahmad, Al-Khairan and Al-Wafra.

    The MPW floated the tender on 22 March. The most recent deadline was 21 June.

    According to regional projects tracker MEED Projects, the works include the construction of a major concrete sewer, three collection basins and extensive stormwater drainage basins.

    Rainwater collection tanks will be connected through an independent network, with outlets to the sea via the Nuwaiseeb exit to manage overflow.

    The infrastructure will also filter pollutants such as oils, minerals and sediments to protect water quality and support environmental sustainability.

    The project aims to reduce surface runoff, prevent street and urban flooding, and improve groundwater recharge.

    Kuwait’s MPW currently has several contracts out for tender for infrastructure works across various parts of the country.

    Also, in March, the client released two additional tenders covering the construction of a treated water system in Kuwait’s southern region and another in Kuwait’s northern region.

    Bids for both projects are due by 28 June.

    Meanwhile, the MPW is planning to begin construction of the $3.3bn North Kabd sewage treatment plant, which has a planned capacity of up to 1 million cubic metres a day.

    China State Construction Engineering Corporation (CSCEC) won the contract to build the plant earlier this year.

    > Be recognised among the best in the industry at the MEED Projects Awards 2026 …

    https://image.digitalinsightresearch.in/uploads/NewsArticle/17411675/main.jpg
    Mark Dowdall
  • Contractor wins Emaar Dubai Harbour project deal

    24 June 2026

     

    Local construction firm Al-Sahel Contracting Company has won a contract to build The Bristol Luxury Hotels & Resorts project in Dubai.

    The contract was awarded by local real estate developer Emaar Properties.

    The Bristol Luxury Hotels & Resorts is located at Emaar Beachfront in Dubai Harbour.

    The project comprises a 54-storey mixed-use building with about 150 hotel keys and 227 one- to four-bedroom apartments.

    Enabling works have been completed by local firm Dutch Foundation.

    Dubai-based Mirage Leisure & Development is the project’s consultant.

    Construction is expected to be completed by 2028.

    The contract award follows Emaar’s appointment of Dubai-based Aroma International Building Contracting to build the Address Grand Downtown tower.

    The award also comes shortly after Emaar reported strong operating momentum in 2025, led by record property sales of AED80.4bn ($21.9bn), up 16% year on year.

    The company’s revenue backlog from property sales rose to AED155bn ($42bn), supporting visibility on future revenue recognition.

    Total revenue for 2025 reached AED49.6bn ($13.5bn), a 40% year-on-year increase. Earnings before interest, taxes, depreciation and amortisation grew 33% to AED25.6bn ($7bn), while net profit before tax rose 36% to AED25.7bn ($7bn).

    Emaar’s platform continued to support performance across property development, malls, hospitality, leisure and international operations.

    > Be recognised among the best in the industry at the MEED Projects Awards 2026 …

    https://image.digitalinsightresearch.in/uploads/NewsArticle/17411104/main.jpg
    Yasir Iqbal
  • Kuwait tenders oil manifold project

    24 June 2026

    State-owned upstream operator Kuwait Oil Company (KOC) has tendered a contract to construct remote header manifolds and associated works in the southern and eastern regions of Kuwait.

    A meeting with prospective contractors has been scheduled for 21 July 2026, and bids are due to be submitted ahead of a deadline on 20 September 2026.

    Manifolds are devices used in the oil sector to divide the flow of liquids from a single source to several outlets, or to collect liquids, or vice versa.

    Previously, a project with a similar scope in the same region was awarded to the Kuwaiti contractor Al-Ghanim International General Trading & Contracting.

    In 2016, it signed a contract worth $435m to construct remote header manifolds and associated works in the south and east Kuwait areas.

    The scope of that contract included design, procurement, construction and commissioning of 25 remote manifold stations and associated pipelines in south and east Kuwait using multi-phase pumps to deliver liquids to gathering centres.

    Kuwait’s oil fields are connected to more than 25 gathering centres, which serve as collection points for crude oil produced by several wells connected by flowlines, providing initial treatment by separating associated gas and removing salt.

    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/17409564/main.jpg
    Wil Crisp
  • Firm wins $94m Diriyah MEP works deal

    23 June 2026

    Riyadh-based Red Sea International Company has announced that its subsidiary, Fundamental Installation for Electric Work Company (FirstFix), has won a SR352m ($94m) contract to carry out mechanical, electrical and plumbing (MEP) works for a project in Diriyah.

    The contract was awarded by Salini Saudi Arabia, the local subsidiary of Italian contractor Webuild.

    In a filing on the Saudi Stock Exchange (Tadawul), the company said the scope of work includes the supply, installation, testing and commissioning of all MEP works, as well as related engineering works.

    The contract duration is 454 days.

    In July last year, Webuild announced that it had won a $600m contract from Diriyah Company for a package for the Diriyah Square project.

    The contract relates to construction works on package three of the Diriyah Square project. It includes finishing and MEP works on more than 70 buildings and public spaces within Diriyah Square.

    These assets cover a total area of about 365,000 square metres.

    Webuild is already working on the underground multi-storey car park at Diriyah Square.

    The three-level underground car park will serve the mixed-use Diriyah Square district, which will include leisure and entertainment facilities, hotels, retail, Grade A offices, the King Salman Grand Mosque and residential units designed in the traditional Najdi architectural style.

    The car park has a floor area of 1 million square metres, with underground roads and tunnels beneath Diriyah Square, and a capacity for 10,500 cars.

    The parking facility will directly connect commuters with all of Diriyah’s destinations, including Wadi Hanifah, the Western Ring Road and a national motorway. It will be a key component of the City of Riyadh Arterial Road system.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/17397460/main.jpg
    Yasir Iqbal
  • Contractors win deals for Saudi Energy transmission projects

    23 June 2026

     

    Saudi Arabia-based Haif Company has won contracts for two separate substation projects in Saudi Arabia, according to sources.

    The first involves the construction of a 132/33/13.8kV substation for Saudi Energy, formerly Saudi Electricity Company, which will replace the existing Tabuk substation 2 in Tabuk, northwestern Saudi Arabia.

    The works include the construction of a new substation, along with GIS, transformers, switchgear, capacitor banks, MV/LV cable systems and protection infrastructure.

    Ten firms submitted bids for the project last December. The bidders included:

    • Al-Babtain Contracting (Saudi Arabia)
    • Alfanar Projects (Saudi Arabia)
    • Al-Gihaz Holding (Saudi Arabia) 
    • Al-Osais International Holding (Saudi Arabia)
    • Danway Electrical & Mechanical Engineering (UAE)
    • Haif Company (Saudi Arabia)
    • Mohammed Al-Ojaimi Group (Saudi Arabia)
    • Nesma Infrastructure & Technology (Saudi Arabia)
    • Saudi Services for Electro Mechanic Works (Saudi Arabia)
    • Tareg Al-Jaafari Contracting Est (Saudi Arabia)

    In addition to Tabuk, Saudi Energy is planning several power transmission projects in Al-Jouf, Medina and the Eastern Province as part of the kingdom’s push to upgrade its electricity transmission and distribution infrastructure

    The second Haif contract involves a 132/33kV substation project at Hail to support the integration of solar generation from the Al-Kahfah photovoltaic facility into the network. Together, the projects are valued at about $90m.

    Elsewhere, the local Trading & Development Partnership has been appointed to build a 132/33kV substation at Al-Jouf, in Al-Jouf Province.

    The facility will deliver a transmission capacity of about 168 MVA to the Al-Busitaa agricultural site, supporting the Liquid Fuel Displacement Programme, which aims to reduce reliance on diesel generators and fuel oil for power generation.

    Nine bids were submitted for the project last year.

    According to MEED Projects, Saudi Energy has almost $2.3bn-worth of projects currently under bid evaluation, including the 500kV overhead transmission line, approximately 466km long, for the Eastern Operating Area and the Central Operating Area in the Eastern Province. The main contract is expected to be awarded later in 2026.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/17397346/main.jpg
    Mark Dowdall