meed-logo

line1 line2 line3
SIGN IN / REGISTER

Saudi economy shows signs of weakness

3 August 2023

 

The Saudi economy is showing signs of weakness as negative growth in the oil economy overshadows the positive growth registered by the non-oil economy.

On 31 July, London-based Capital Economics said the Saudi economy was now technically in recession after the kingdom's General Authority for Statistics (Gastat) confirmed that the economy contracted during the second quarter of this year with the publication of its GDP Flash Estimates.

The estimates show that the Saudi economy contracted by 0.1 per cent during the second quarter of this year compared to the first quarter. Real GDP declined by 1.4 per cent in the first quarter compared to the fourth quarter of 2022.

The statistics look more encouraging on an annual basis. Real GDP increased by 1.1 per cent during the second quarter of 2023 compared to the same period in 2022. The non-oil economy grew by 5.5 per cent in the second quarter compared to the same period last year, while the oil economy decreased by 4.2 per cent compared to the previous year. During the first quarter of this year, growth was 3.8 per cent compared to the first quarter of 2022. 

Projects performance

The projects market has also performed strongly during the first half of the year. According to regional projects tracker MEED Projects, $42bn of deals were signed, the most on record. The previous high was the $28bn awarded during the first half of 2014.

Capital Economics said the technical recession was mainly due to reductions in oil production, despite the non-oil economy maintaining strong growth. The oil economy contracted by 1.4 per cent during the second quarter on a quarter-on-quarter basis, while the non-oil economy increased by 2 per cent.

Looking to the future, Saudi Arabia has adopted even more stringent cuts to its oil production in the third quarter, with an additional voluntary reduction of one million barrels a day in July and August.

Capital Economics expects this to counter further strength in the non-oil sector, leading to an anticipated contraction in GDP of about 3 per cent quarter-on-quarter in the third quarter. It also says there is a growing possibility that the upcoming Opec+’s Joint Ministerial Monitoring Committee meeting will result in the kingdom announcing the extension of this voluntary cut until at least the end of September.

If this occurs, the economy is expected to shrink by about 0.5 per cent over 2023. Excluding the global financial crisis and pandemic, this would mark the poorest GDP performance in over two decades.

IMF downgrade

The economic data for the second quarter was released shortly after the Washington-based IMF downgraded its real GDP growth projection for Saudi Arabia in 2023 to 1.9 per cent in its latest World Economic Outlook update.

The fund had in April anticipated a growth rate of 3.1 per cent for the year, adjusting this forecast to 2.1 per cent in June due to global macroeconomic concerns and uncertainties in oil demand.

The downward revision in Saudi Arabia’s growth forecast has broader implications for the wider Middle East region, which the IMF now expects to grow by 2.6 per cent in 2023, down from 3.1 per cent in its April forecast.

The slump in Saudi Arabia’s economic output contrasts strongly with its performance in 2022, when its growth was gauged at 8.7 per cent by the IMF, driven by a boost in oil revenue amid high energy prices. The kingdom also achieved its first budget surplus in almost a decade.

The signs of weakness in the Saudi economy coincide with reports of losses for the Public Investment Fund (PIF), which is driving much of the development of the non-oil economy in the kingdom. According to a report by Bloomberg, it made an investment activity loss of about $11bn in 2022, in sharp contrast to the $19bn profit reported the previous year. Despite the loss on investment activity made last year, PIF’s total assets grew from $676bn to about $778bn in 2022.

The PIF and its subsidiary companies are leading the development of a wide range of projects in the kingdom, including five official gigaproject developers. They are Neom, Red Sea Global, Roshn, Qiddiya and Diriyah.

Debt markets

The investment losses and the ramp-up of spending on domestic projects mean the PIF is likely to raise more debt. According to another report by Bloomberg, the fund has hired banks for a debut Islamic dollar bond sale to help finance its global spending plans. The fund could raise about $3bn, although the final size of the sukuk could be bigger depending on investor demand. It has mandated HSBC, Standard Chartered, Emirates NBD Bank and Al-Rajhi Capital for the offering.

As of the end of 2022, the fund’s borrowings amounted to $85bn. Earlier this year, it secured $5.5bn with a three-tranche green bond sale.

https://image.digitalinsightresearch.in/uploads/NewsArticle/11050401/main.gif
Colin Foreman

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

Click here to register
Exclusive from Meed
Related Articles
  • Saudi Arabia’s private sector steps up

    4 March 2026

    Commentary
    Colin Foreman
    Editor

    Read the March issue of MEED Business Review

    At the Future Investment Initiative (FII) in Riyadh in 2019, a head of a regional family business voiced a guarded concern. The worry was that the scale and speed of the Public Investment Fund’s (PIF’s) projects were crowding out the private sector, leaving little space for traditional players to compete.

    Fast forward more than six years and much has changed. In 2026, the era of the PIF acting as the principal driver for development is giving way to a new phase where the private sector is taking a more active role.

    At February’s Private Sector Forum (PSF), officials acknowledged that the kingdom’s priorities have evolved since 2016. This has led to reprioritisation, including the indefinite postponement of the 2029 Asian Winter Games in Trojena and the scaling back of projects such as The Line – moves framed as strategic adjustments amid global economic uncertainty.

    With the 2034 Fifa World Cup and Expo 2030 on the horizon, alongside the rapid ascent of artificial intelligence, Riyadh is right to realign its capital. It is far more reassuring to see a government adapt its strategy to a changing global economy than to blindly pursue an outdated plan. The PIF, now managing $913bn in assets, is seeking ‘escape velocity’, allowing sectors such as tourism and real estate to stand independently.

    The private sector is beginning to respond. Recent agreements signed at the PSF – ranging from King Salman International airport’s mixed-use developments to Roshn’s logistics partnership with Agility – show that local and regional firms are rising to the challenge.

    There is still work to be done. Some sectors are more ready for investment than others, and scaling back projects has dented the confidence of some investors.

    But overall, the tide is turning. The crowding out fears of 2019 have been replaced by a drive to get the private sector more involved, and while it will take time for momentum to fully develop, the process of passing the baton has already begun.

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

    Riyadh urges private sector to take greater role; Chemical players look to spend rationally; Economic uptick lends confidence to Cairo’s reforms.

    Distributed to senior decision-makers in the region and around the world, the March 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/15842555/main.gif
    Colin Foreman
  • Etihad Rail conducts passenger rail trial run in Abu Dhabi

    4 March 2026

    Etihad Rail, the UAE’s national rail operator, has carried out a passenger train trial on the line linking Al-Ghuwaifat station at the Saudi border with Al-Faya station in Abu Dhabi.

    The test was organised in coordination with the Emergencies, Crises and Disasters Management Centre Abu Dhabi (ADCMC).

    In a statement, ADCMC said the exercise is intended to help maintain essential services and offer safe, dependable transport options as conditions change.

    It also highlighted the route’s strategic value in supporting movement for citizens and residents, while giving authorities the ability to activate alternate corridors in line with approved emergency response plans.

    ADCMC added that running this route with Etihad Rail fits within a wider set of coordinated measures designed to reinforce logistical security, aligned with business continuity planning and multi-scenario risk management frameworks.

    The UAE’s first national passenger rail network is due to begin operations soon, using the existing 900-kilometre (km) railway stretching from Al-Ghuwaifat to Fujairah.

    The system will include 11 stations. Early services are expected to connect Mohammed Bin Zayed City (Abu Dhabi), Jumeirah Golf Estates (Dubai), University City (Sharjah) and Al-Hilal (Fujairah).

    Other stops include Al-Sila’, Al-Dhannah, Al-Mirfa, Madinat Zayed, Mezaira’a and Al-Faya in Abu Dhabi, along with Al-Dhaid in Sharjah.

    The passenger fleet is planned to include 13 trains, each with a capacity for up to 400 passengers.

    Target travel times include 57 minutes between Abu Dhabi and Dubai, 105 minutes from Abu Dhabi to Fujairah, and 70 minutes from Abu Dhabi to Ruwais.

    On the operations side, Etihad Rail and France’s Keolis agreed in October 2025 to form a joint venture to oversee passenger services.

    In June 2022, Etihad Rail awarded Spain’s CAF Group a AED1.2bn ($327m) contract covering the design, manufacture, supply and maintenance of the passenger trains.

    Freight services are already running, with operations spanning 11 terminals: Ruwais Inland Terminal, Ruwais Port, ICAD, Khalifa Port, Dubai Industrial City, Jebel Ali Port, Al-Ghail Dry Port, Fujairah Port, Ghuwaifat Terminal, Shah Terminal and Habshan Terminal.

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

    Riyadh urges private sector to take greater role; Chemical players look to spend rationally; Economic uptick lends confidence to Cairo’s reforms.

    Distributed to senior decision-makers in the region and around the world, the March 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/15854553/main.jpg
    Yasir Iqbal
  • Iraq’s Atrush and Sarsang oil fields stop production due to Iran conflict

    4 March 2026

    Production has stopped at the Atrush and Sarsang blocks in the Kurdistan Region of Iraq, and output has been slashed at key fields in the south of the country.

    Canada-based ShaMaran Petroleum Corporation, which holds stakes in Atrush and Sarsang, said that production had stopped at both fields as a precautionary measure due to “the deterioration in the regional security environment” related to the US and Israel’s conflict with Iran.

    ShaMaran holds a 50% working interest in the Atrush Block and an 18% working interest in the Sarsang Block.

    Erbil-headquartered HKN Energy is also a partner in both fields.

    Prior to the latest shutdown, in the company’s most recent quarterly report, it said that Atrush had produced an average of 29,400 barrels a day (b/d) over the three-month period, and Sarsang produced 18,200 b/d.

    Due to the field closures in Iraqi Kurdistan, it has been reported that exports to the Turkish port of Ceyhan via the Iraq-Turkiye pipeline have fallen to zero while all of the crude produced in the region is used domestically.

    Iraq’s Rumaila field, in the south of the country, is also being severely impacted by the ongoing conflict.

    On 3 March, the decision was taken to completely stop production at the South Rumaila field, after Iran’s Islamic Revolutionary Guard Corps declared the Strait of Hormuz closed.

    The Rumaila oil field, which is made up of North Rumaila and South Rumaila, is the second-biggest oil field in the world.

    The oil field normally has the capacity to produce around 1.2 million b/d, but has cut production by at least 700,000 b/d due to overloaded storage.

    Also in the south of the country, there have been cuts to production at the West Qurna-2 and Maysan fields.

    Several other Iraqi oil and gas fields have shut down recently amid the US and Israel’s ongoing war with Iran.

    The Shaikan field in northern Iraq’s semi-autonomous Kurdistan region has stopped production due to security concerns.

    The field is operated by London-listed Gulf Keystone Petroleum, which has said in a statement that it had “temporarily shut-in production operations and has taken measures to protect staff in light of the developing regional security environment”.

    Shaikan is one of Iraqi Kurdistan’s largest producing fields and produced more than 41,500 barrels a day in 2025.

    The production stoppage at Shaikan came days after gas production was halted at Iraqi Kurdistan’s Khor Mor field on 28 February.

    UAE-based Dana Gas stopped supplying power plants from the field due to the “abnormal situation and war taking place in the area”, according to a joint statement from the Kurdistan region’s natural resources and electricity ministries.

    The gas halt is expected to cut electricity generation capacity by 2,500-3,000MW, with authorities seeking alternative supply to limit the shortfall, the ministries said.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15853790/main.jpg
    Wil Crisp
  • Iraq under pressure as oil exports slashed

    4 March 2026

    Analysis
    Wil Crisp
    Oil & gas reporter

    Iraq’s oil and gas sector is facing mounting challenges as production levels drop sharply amid the US and Israel’s ongoing war with Iran.

    In the south of the country, oil exports have been paralysed by the closure of the Strait of Hormuz, and, in the country’s northern region of Iraqi Kurdistan, exports via the Iraq-Turkiye Pipeline (ITP) have fallen to zero.

    Industry insiders are expecting the impact to be felt for some time to come.

    On 2 March, Iran’s Revolutionary Guard Corps (IRGC) said the Strait of Hormuz is closed and warned that any vessel attempting to pass through will be attacked.

    Ebrahim Jabari, a senior adviser to the IRGC’s commander-in-chief, said: “The strait is closed. If anyone tries to pass, the heroes of the Revolutionary Guard and the regular navy will set those ships ablaze.”

    Stakeholders in Iraq’s oil and gas sector believe that the closure of the Strait by Iran is likely to have a long-term impact on companies operating in the south of the country.

    One source said: “The outlook for the companies operating in the south is very bad right now.

    “Potentially, a lot of companies in the south are going to be very anxious about the Strait of Hormuz for a very long time.

    “There are hardly any other export routes they can use, and even if Iran’s military capabilities are substantially eroded, it’s going to be very hard to defend ships that are passing through there.”

    On 3 March, the decision was taken to completely stop production at the South Rumaila field, after Iran’s IRGC declared the Strait of Hormuz closed.

    The Rumaila oil field, which is made up of North Rumaila and South Rumaila, is the second-biggest oil field in the world.

    The oil field normally has the capacity to produce 1.2 million barrels a day (b/d), but has cut production by at least 700,000 b/d due to overloaded storage.

    Also in the south of the country, there have been cuts to production at the West Qurna 2 and Maysan fields.

    Pipeline problem

    The main export route for oil producers in Iraqi Kurdistan is the ITP.

    This key pipeline, which reopened on 27 September last year, was closed again after production from the region dropped dramatically due to multiple oil fields closing as a safety precaution.

    The fields that have temporarily stopped production include the Atrush and Sarsang fields.

    Canada-based ShaMaran Petroleum Corporation, which holds stakes in both fields, said that the closures were due to “the deterioration in the regional security environment”.

    On top of this, the Iraqi Kurdistan’s Shaikan field, which London-listed Gulf Keystone Petroleum operates, has stopped production due to security concerns.

    Shaikan is one of Iraqi Kurdistan’s largest producing fields and produced more than 41,500 b/d in 2025.

    “When it comes to the outlook for future oil exports, the calculation is completely different for these companies in Iraqi Kurdistan compared to the companies in the south of the country,” said one source.

    “It’s possible that the pipeline will be easier to open in the near future than the Strait of Hormuz.

    “It’s not so close to Iran and, so far, no damage has been sustained by the pipeline or the oil fields.

    “With prices so high right now, everyone involved in exporting oil via the pipeline is highly motivated to see it restarted.”

    The disruption to global oil and gas supplies caused by the Iran conflict has driven global oil prices up by around 15%, with Brent crude oil briefly rising above $85 a barrel on 3 March, the highest it has been since July 2024.

    One source said: “These high oil prices are going to be a nightmare for consumers – but if you are an oil company, it’s an opportunity to make some serious money.

    “However, you can only make that money if you can ship your oil – and a lot of oil companies in Iraq are going to struggle to do just that.”

    Another source said: “There’s nothing technically wrong with the Kurdistan fields or the pipeline at the moment, and a lot of people believe they could be brought back online relatively quickly.

    “The pipeline has only been shut down because of the oil field closures. All of the oil that is currently being produced in Iraqi Kurdistan is being used domestically.”

    Key staff at Iraqi Kurdistan’s oil companies remain in the country, and the companies are planning quick restarts to cash in on current high prices, according to sources.

    One said: “While many of these companies have plans in place for evacuations by land to Turkiye if the situation worsens, right now it seems more likely that things will stabilise and the companies will bring their fields back online soon.

    “Workers have been told to stay inside – but many are used to the threat of drone and rocket attacks, and they are still going to the pub and living their lives as normal.”

    Uncertain future

    While many stakeholders in Iraqi Kurdistan believe the outlook for oil companies in the region is better than in the south of the country, significant challenges remain, and the situation could change dramatically due to the chaotic nature of the ongoing conflict.

    One factor that is likely to remain challenging in Iraqi Kurdistan is logistics for key personnel.

    One source said: “Airport closures and flight cancellations are likely to dog this region for some time to come, so getting people in and out is expected to remain difficult.”

    Another concern is potential attacks on oil fields by militant groups in the region that are loyal to Iran.

    “We’ve seen that Iran wants to lash out and do damage to oil assets in nearby countries – so an attack on key fields in Iraqi Kurdistan would not be a surprise,” the source added.

    An attack on the ITP pipeline itself could dramatically change the outlook for Iraqi Kurdistan.

    Drone attacks or rockets could potentially put the pipeline out of action for months, dealing a serious blow to the outlook for the region’s oil companies.

    While the future for the oil sector in both federal Iraq and the Kurdistan region remains highly uncertain, it is clear to everyone involved that the disruptions to the country’s oil and gas sector are causing severe economic damage to the oil-reliant country.

    On 3 March, Baghdad-based research organisation Eco Iraq Observatory estimated that Iraq was losing $128m a day after the shutdown of the Rumaila and Kurdistan fields.

    It said a one-week shutdown could cost the Iraqi treasury nearly $900m, and a month could result in losses exceeding $3.8bn.

    With Iraq relying on oil for more than 90% of government revenues, it is likely that the country will rapidly enter an economic crisis if it does not find a way to bring exports back online over the coming days.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15853788/main.jpg
    Wil Crisp
  • NWC to tender next phase of sewage treatment programme

    4 March 2026

     

    Saudi Arabia’s National Water Company (NWC) is preparing to tender a contract for the construction of 10 sewage treatment plants as part of the next phase of its long-term operations and maintenance (LTOM) sewage treatment programme. 

    The final details of the Eastern A Cluster (LTOM14) package are being finalised, with a tender likely to be issued in March or April, sources close to the project told MEED.

    Estimated to cost $180m, the sewage treatment plants will have a total capacity of 184,440 cubic metres a day (cm/d).

    The tender for the North Western C Cluster (LTOM 13) package is currently on “on hold”, sources added.

    This $250m project includes the construction of four sewage treatment plants with a total capacity of 132,000 cm/d.

    Details were not disclosed as to when this tender will likely be released.

    In February, MEED exclusively reported that NWC was evaluating five bids for package 12 of the sewage treatment programme.

    Known as the North Western B Cluster, LTOM12 forms part of the second phase of NWC’s rehabilitation of sewage treatment plants programme.

    The contract covers the construction and upgrade of seven sewage treatment plants with a combined capacity of about 162,000 cm/d.

    The companies that have submitted proposals include:

    • Alkhorayef Water & Power Technologies (Saudi Arabia)
    • Civil Works Company (Saudi Arabia)
    • Miahona (Saudi Arabia)
    • Beijing Enterprises Water Group – BEWG (Hong Kong)
    • Al-Yamama (Saudi Arabia)

    MEED also recently reported that six contractors are competing for the North Western A Cluster Sewage Treatment Plants Package 11 (LTOM11), which has an estimated value of about $211m.

    The project involves the construction and upgrade of two sewage treatment plants with a combined capacity of about 440,000 cm/d.

    The scheme is being procured on an engineering, procurement and construction basis with a long-term operations component. 

    In January, a consortium of United Water (China), Prosus Energy (UAE) and Armada Holding (Saudi Arabia) won the main contract for the Northern Cluster Sewage Treatment Plants Package 10 (LTOM10).

    This contract was the first to be awarded under the second phase of NWC’s rehabilitation of sewage treatment plants programme.

    NWC previously awarded $2.7bn-worth of contracts for the first phase of its LTOM programme. This comprises nine packages covering the treatment of 4.6 million cm/d of sewage water for the next 15 years.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15841370/main.jpg
    Mark Dowdall