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
  • I Squared eyes $2bn deployment across PIF portfolio

    13 July 2026

    Saudi Arabia's Public Investment Fund (PIF) has signed a memorandum of understanding (MoU) with US infrastructure investor I Squared Capital, under which the firm will pursue the deployment of up to $2bn in real estate and infrastructure assets owned by the sovereign fund and its portfolio companies.

    The non-binding agreement, announced on 13 July, will see the two work with PIF portfolio companies to identify opportunities in digital infrastructure and district cooling, which the parties describe as critical enablers of the real estate sector. I Squared will target allocating up to $1bn in each of the two areas, with the option to scale across additional related business themes.

    The MoU aligns with PIF's 2026-30 strategic objectives to partner with global investors on opportunities within its portfolio and to maximise the value of its portfolio companies. The collaboration is expected to accelerate project delivery and increase the contribution of third-party capital into opportunities across the portfolio.

    Founded in 2012 and headquartered in Miami, I Squared Capital manages $60bn in assets across power and utilities, transport and logistics, digital infrastructure, and environmental and social infrastructure. Its portfolio includes more than 100 companies operating in over 70 countries.

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

    Stress test for Gulf aviation; Mixed performance as country outlooks diverge in the Levant; GCC tourism sector pivots from crisis to recovery mode.

    Distributed to senior decision-makers in the region and around the world, the July 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/17655682/main2812.png
    Colin Foreman
  • Former emir of Qatar Sheikh Hamad dies aged 74

    13 July 2026

    Sheikh Hamad Bin Khalifa Al-Thani, the former emir who presided over Qatar's transformation into one of the world's richest states and its largest exporter of liquefied natural gas (LNG), has died at the age of 74.

    The Amiri Diwan, Qatar's official administrative office, announced his death on the morning of 12 July, describing him as a great leader and mourning the loss to the nation. The country declared a four-day period of public mourning, with work suspended across ministries, government agencies and public institutions from Monday 13 July until employees resume on Sunday 19 July. Flags are to be flown at half-mast throughout the mourning period. Funeral prayers were held after Maghrib prayer on 12 July at the Imam Muhammad Bin Abdul Wahab Mosque, after which his body was laid to rest in Lusail Cemetery.

    Sheikh Hamad ruled Qatar from 1995 to 2013 and led its modern economic development. When he took power from his father, the country's finances were strained and its oil reserves were declining. Over the following 18 years, he oversaw an era of rapid economic, social and cultural change that established Qatar as a significant global player in energy, finance and diplomacy.

    Gas foundations

    Central to that transformation was the development of Qatar's North Field gas reserves, one of the largest single accumulations of natural gas in the world. Through a series of international partnerships and investments, Sheikh Hamad's government built the infrastructure that turned the country into the world's largest exporter of LNG, a position that underpinned decades of budget surpluses and funded an expansive development programme across construction, infrastructure and social services.

    The wealth generated by gas exports allowed Qatar to invest heavily both at home and abroad. Sheikh Hamad founded the Qatar Investment Authority (QIA), the sovereign wealth fund that acquired stakes in assets ranging from the London department store Harrods to the football club Paris Saint-Germain. The QIA remains one of the most active sovereign investors in the world and a cornerstone of Qatar's economic strategy.

    Born in Doha in 1952, Sheikh Hamad studied at the UK's Royal Military Academy Sandhurst before joining the Qatar Armed Forces and later serving as defence minister. He was named heir apparent in the late 1970s and took power in 1995 while his father was abroad.

    Global profile

    Sheikh Hamad used Qatar's growing wealth to raise its international standing well beyond its size. In 1996, he backed the launch of the Al-Jazeera television network, which grew into one of the most influential media organisations in the region and further afield. His government also pursued an active diplomatic role, hosting negotiations and international events that positioned Doha as a mediation hub.

    The most prominent, and most contested, achievement of his tenure came in 2010, when Qatar won the right to host the 2022 Fifa World Cup. The tournament prompted a multibillion-dollar construction programme, spanning stadiums, transport networks, hotels and wider urban infrastructure, and accelerated the build-out of projects across the country. The bid and the subsequent preparations drew scrutiny over labour conditions and allegations of corruption, of which Qatar was later cleared.

    Sheikh Hamad's rule also brought institutional change, including the promulgation of Qatar's first permanent constitution in 2004 and the introduction of municipal elections in which women were permitted to vote and stand as candidates.

    In 2013, he handed power to his son and heir apparent, Sheikh Tamim Bin Hamad Al-Thani, then 33, in a rare voluntary abdication by a hereditary Gulf ruler. The transition allowed for a managed handover of a state that had been reshaped over the previous two decades.

    Tributes were offered by leaders across the Gulf and beyond, including UAE President Mohamed Bin Zayed Al-Nahyan, Egyptian President Abdel Fattah El-Sisi and the UK's King Charles III, who said Sheikh Hamad had dedicated many years of distinguished service to Qatar.

    Qatar was a British protectorate until 1971, with the Al-Thani family having ruled since 1851. Sheikh Hamad leaves a state whose economic weight, built largely on the gas reserves developed during his reign, continues to shape the wider Gulf economy.

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

    Stress test for Gulf aviation; Mixed performance as country outlooks diverge in the Levant; GCC tourism sector pivots from crisis to recovery mode.

    Distributed to senior decision-makers in the region and around the world, the July 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/17651433/main.jpg
    Colin Foreman
  • Contractors submit bids for Ras Tanura refinery gas pipeline

    13 July 2026

     

    Register for MEED’s 14-day trial access 

    Contractors have submitted bids to Saudi Aramco for a tender to replace a pipeline in the Gas Line Abqaiq-Ras Tanura (GART) transmission network.

    The GART grid transports associated gas and natural gas liquids (NGL) from the Abqaiq oil processing complex as feedstock, northwards to the Ras Tanura refinery in Saudi Arabia’s Eastern Province.

    The aim of the project is to replace the GART-22 pipeline that connects the Juaymah export terminal on the Gulf coast in the Eastern Province to the Ras Tanura refinery, to ensure reliable fuel gas supply and meet ongoing demand.

    The basic scope of work for the project is to install a new 24-inch pipeline system to replace the GART-22 line and the abandoned GART-24 line. It will cover a distance of 18 kilometres between Juaymah and the Ras Tanura terminal.

    The scope also includes the installation of associated scraper trap facilities (launcher and receiver), pressure control valves, motor-operated valves and gas detection and sampling systems.

    Aramco issued the tender for the project in May, setting an initial deadline of 30 June for contractors to submit proposals, MEED previously reported.

    The Saudi energy giant then extended the deadline until 10 July, and then allowed bidders until 12 July. Contractors submitted their proposals by that final deadline, according to sources.

    The following contractors, among others, are understood to be bidding for the project:

    • ACE Pipeline Arabia
    • Combined Group Contracting Company
    • Gas Arabian Services Company
    • Max Streicher Saudi Arabia
    • National Basics Company
    • Saad Ali Alessa Group
    • Sicim
    • Sinopec Engineering Group Saudi
    • Tecton Engineering & Construction
    Ras Tanura refinery complex

    The Ras Tanura refinery is the oldest, and one of the largest, crude oil refineries in Saudi Arabia. The complex has a refining capacity of 550,000 barrels a day (b/d).

    The facility also has a 305,000 b/d NGL processing facility, a 960,000 b/d crude stabilisation facility, combined steam and gas turbine electrical power generation plants with a summer capacity of 145MW and a winter capacity of 158MW, and a combined 150-pound and 600-pound steam capacity of 6,217 million pounds an hour.

    It has 75 crude oil and products storage tanks with a combined capacity of 5.8 million barrels.

    The Ras Tanura refinery’s major facilities include a 325,000 b/d crude distillation unit, a 225,000 b/d gas condensate distillation unit, a 50,000 b/d hydrocracker and 107,000 b/d of catalytic reforming capacity.

    The facility is Aramco’s only refinery to contain a Visbreaker processing unit, which has a 60,000 b/d capacity.

    The Visbreaker reduces the quantity of residual oil produced in the distillation of crude oil and increases the yield of more valuable middle distillates, heating oil and diesel.

    The refinery complex also produces 17,000 b/d of asphalt, more than any other refinery in Saudi Arabia.

    Ras Tanura receives crude feedstock from the Abqaiq, Safaniya and Manifa oil field developments.

    Crude is typically transferred to Ras Tanura through a pipeline and can also be supplied by ship.

    Most of Ras Tanura’s production is transferred to the Dhahran bulk plant for domestic use, while some products are exported from the nearby Ras Tanura shipping terminal.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/17649169/main2152.jpg
    Indrajit Sen
  • AtkinsRealis wins Expo 2030 Riyadh design deal

    13 July 2026

    Canadian engineering firm AtkinsRealis has won a contract to deliver lead design services for the Place & Planet Pavilion at the Expo 2030 Riyadh site.

    The contract was awarded by Expo 2030 Riyadh Company (ERC), which is tasked with delivering the Expo 2030 Riyadh venue.

    AtkinsRealis will deliver the full architectural and engineering design for the pavilion, coordinate all relevant design disciplines and embed sustainable design principles throughout.

    The Place & Planet Pavilion is anticipated to be a key attraction at Expo 2030 Riyadh.

    The latest development follows ERC tendering a contract to build the Saudi Arabia pavilion at the site.

    The pavilion is a major asset located within the KSA District on the eastern side of the Expo 2030 Riyadh masterplan, within the Loop of Nations district.

    The tendering of the pavilion structure followed swift progress on the site’s infrastructure development works.

    In April, ERC awarded two contracts for the next phase of infrastructure works at the site to local firm Al-Yamama Company.

    The scope covers the construction of road networks and infrastructure for water, sewage, electricity, telecommunications and electric vehicle charging.

    These awards followed ERC’s January award of an estimated SR1bn ($267m) contract for initial infrastructure works at the site to local firm Nesma & Partners. That scope covers about 50 kilometres of integrated infrastructure networks, including internal roads and utilities such as water, sewage, electrical and communication systems and electric vehicle charging stations.

    The overall infrastructure works – covering the construction of main utilities and civil works at Expo 2030 Riyadh – are split into three packages:

    • Lot 1 covers the main utilities corridor
    • Lot 2 includes the northern cluster of the nature corridor
    • Lot 3 comprises the southern cluster of the nature corridor 

    The masterplan encompasses an area of 6 square kilometres, making it one of the largest sites designated for a World Expo event. Situated to the north of the Saudi capital, the site will be located near the future King Salman International airport, and will provide direct access to various landmarks within Riyadh.

    The Public Investment Fund, Saudi Arabia’s sovereign wealth vehicle, launched ERC – a wholly owned subsidiary – in June 2025 to build and operate facilities for Expo 2030.

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

    Stress test for Gulf aviation; Mixed performance as country outlooks diverge in the Levant; GCC tourism sector pivots from crisis to recovery mode.

    Distributed to senior decision-makers in the region and around the world, the July 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/17642053/main.jpg
    Yasir Iqbal
  • Conflict fails to dent Saudi Arabia’s A+ rating

    13 July 2026

    Ratings agency Fitch has affirmed Saudi Arabia's long-term foreign-currency issuer default rating at A+ with a stable outlook, citing fiscal and external balance sheets that remain significantly stronger than those of similarly rated peers.

    In a rating action published on 10 July, Fitch said the kingdom's economy and public finances had proved resilient to the US-Iran war, supported by significant fiscal buffers in the form of deposits and other public-sector assets. Oil dependence and governance scores had improved but remained weaknesses, while geopolitical risk stayed high.

    A deal allowing a ceasefire and the reopening of the Strait of Hormuz is broadly in place, although Fitch warns that flare-ups highlight risks to its near-term sustainability. The agency says further US or Israeli military action against Iran remains quite likely. It expects the reopening of the strait to return the oil market to oversupply, pulling Brent down to an average of $60 a barrel in 2028 from $87 a barrel in 2026.

    Fitch forecasts real GDP growth will slow to 0.6% in 2026, hit by disruption to trade during the closure of the strait. Flows through the East-West pipeline support oil production during the war, but output at an annual average of 9 million barrels a day will sit below the 2025 level.

    Growth is expected to rebound in 2027 as flows normalise, before easing to 2.9% in 2028, supported by the phased opening of gigaprojects and guidance that sovereign wealth vehicle the Public Investment Fund will keep domestic spending largely unchanged.

    The fiscal deficit is projected to narrow in 2026 as higher oil prices offset lower volumes, before widening to 4.7% in 2027 on a fiscal breakeven oil price of $94 a barrel. Fitch projects government debt will rise to 41.3% of GDP by the end of 2028, from 31.8% at the end of 2025, above the government's guidance of a 40% ceiling.

    The agency describes the external balance sheet as healthy, with sovereign net foreign assets of 38.5% of GDP by the end of 2028. Banks have been resilient to the war, with non-performing loans at 1.1% and a Tier 1 capital ratio of 19.2% at the end of the first quarter of 2026.

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

    Stress test for Gulf aviation; Mixed performance as country outlooks diverge in the Levant; GCC tourism sector pivots from crisis to recovery mode.

    Distributed to senior decision-makers in the region and around the world, the July 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/17644782/main.gif
    Colin Foreman