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
  • Egypt tenders 500MW solar IPP

    19 February 2026

    Register for MEED’s 14-day trial access 

    Egyptian Electricity Transmission Company (EETC) has issued a request for qualifications for a 500MW solar photovoltaic (PV) independent power producer project in Egypt’s West of Nile area.

    The bid submission deadline is 11 May.

    The project is being supported by the European Bank for Reconstruction & Development and will be developed under a build-own-operate model.

    Developers will be responsible for designing, financing, constructing, owning and operating the plant, with EETC acting as the offtaker for generated electricity.

    US/India-based Synergy Consulting is acting as lead, financial and commercial advisor for this transaction.

    The project forms part of Egypt’s strategy to strengthen long-term electricity supply and increase renewable generation capacity.

    Egypt is targeting 42% renewable energy in its power mix by 2030. The country aims to raise this share to 65% by 2040.

    EETC previously had plans to build a 200MW solar plant in a west Nile area but cancelled the tender for the project in 2020.

    Egypt's power sector had its strongest year in over a decade last year, accounting for $4.2bn of total contract awards.

    Despite dipping from the previous year, solar accounted for about $1bn of total awards. 

    In November, a consortium of local firms Hassan Allam Utilities and Infinity Power won contracts to develop two solar PV projects with a combined capacity of 1,200MW, supported by 720 megawatt-hours (MWh) of battery storage.

    The UAE’s Amea Power and Japan’s Kyuden International Corporation also recently reached financial close on a $700m project comprising a 1,000MW solar plant and 600MWh battery system in Aswan.

    The scheme is backed by a $570m debt package led by the International Finance Corporation and is expected to become Africa’s largest single-asset solar and storage facility when it enters operation later this year.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15701778/main.jpg
    Mark Dowdall
  • Local contractor wins $143m Jeddah sewage contracts

    19 February 2026

    Register for MEED’s 14-day trial access 

    Saudi Arabia’s National Water Company (NWC) has awarded two sewage network contracts worth a combined SR536.3m ($143m) to local contractor Civil Works Company.

    The projects will be implemented over 32 months from site handover and will serve northern Jeddah districts.

    The first contract, valued at SR278.5m ($74.3m), covers incomplete main lines and secondary sewage networks serving parts of the Al-Bashair, Al-Asala and Al-Falah neighbourhoods.

    The scope includes pipelines ranging from 200mm to 800mm in diameter with a total length of about 54.8 kilometres (km).

    The package also includes sewage tunnels with diameters ranging from 600mm to 1,800mm and a total length of approximately 6.5km. Works will also serve the Taybah, Abhar Al-Shamaliyah and Al-Hamdaniyah districts.

    The second contract is valued at SR257.8m ($68.8m). It covers the implementation of main lines and sub-networks to serve part of the Al-Hamdaniya neighbourhood.

    The works include pipelines ranging from 200mm to 1,500mm in diameter with a total length of about 78.5km. The scope also includes horizontal drilling works for sewage tunnels with diameters from 1,200mm to 1,400mm and a total length of approximately 205 metres.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15699620/main.jpg
    Mark Dowdall
  • Saudi Arabia prequalifies firms for gas transmission grids

    19 February 2026

    Register for MEED’s 14-day trial access 

    Saudi Arabia's Energy Ministry has prequalified companies to develop natural gas distribution networks in five industrial cities in the kingdom on a build-own-operate (BOO) basis.

    The industrial zones earmarked are Al-Kharj Industrial City; Sudair City for Industry and Business; and the First, Second and Third Industrial Cities in Jeddah, the Energy Ministry said in a statement.

    The contractors prequalified to bid for the natural gas transmission grids BOO scheme include eight standalone firms and seven consortiums:

    • East Gas (Egypt)
    • Natural Gas Distribution Company (Saudi Arabia)
    • Egyptian Kuwaiti Advanced Operation and Maintenance (Saudi Arabia)
    • Modern Gas (Egypt)
    • Saab Energy Solutions (Saudi Arabia)
    • Sergas Contracting (Saudi Arabia)
    • Bharat Petroleum Corporation (India)
    • UniGas Arabia (Saudi Arabia)
    • Best Gas Carrier / Khazeen / Mubadra (Saudi Arabia)
    • Al Sharif Contracting (Saudi Arabia) / Anton Oilfield Services Group (China) China Oil and Gas Group
    • Hulul (owned by Saudi Arabia’s National Gas and Industrialization Company) /Al-Fanar Gas Group (UAE)
    • Indraprastha Gas (India) / Masah Contracting (Saudi Arabia)
    • Expertise Contracting / PGL Pipelines (UK)
    • National Gas Company (Egypt) / Egypt Gas (Egypt)
    • Taqa Arabia (Egypt) / Taqa Group (UAE)

    The Energy Ministry has set a deadline of 23 April for these prequalified contractors to submit technical bids.

    The ministry added in its statement that it has identified a total of 36 industrial cities in Saudi Arabia for gas infrastructure development.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15699582/main0334.png
    Indrajit Sen
  • Consultants bid for Abu Dhabi airport delivery partner role

    19 February 2026

     

    Abu Dhabi Airports Company (Adac) received bids from major international firms on 19 January for a contract covering the delivery partner role for the upcoming packages at Zayed International airport (AUH).

    The project is part of the AUH satellite terminal programme, estimated at AED10bn ($2.7bn).

    MEED understands that the following firms have submitted bids:

    • Aecom (US)
    • AtkinsRealis/Egis/Mace (Canada/France/UK)
    • Bechtel (US)
    • Hill International (US)
    • Jacobs / Surbana Jurong (US/Singapore)
    • Parsons Corporation / Arup  (US/UK)

    The plan includes a new satellite concourse east of Terminal A, linked by an underground tunnel housing both an automated people mover and a baggage handling system.

    It also includes apron stands, taxi lanes and taxiways, East Midfield landside access and utilities, additional bus gates and the reconfiguration of the North and South aprons and Apron 6.

    The latest tendering activity follows the start of construction works on the East Midfield cargo terminal located at AUH, as MEED reported in December 2024.

    Local firm Raq Contracting is undertaking the construction works on this project. 

    The terminal will cover an area of 90,000 square metres and will have the capacity to handle about 1.5 million tonnes of cargo annually.

    The project is part of a broader plan to enhance the new airport's profile.

    Abu Dhabi opened a new passenger terminal in November 2023 as part of the airport’s plan to increase its passenger traffic in line with the UAE’s wider growth plans, along with projects such as the rail network being built by Etihad Rail.

    In May 2024, MEED reported that AUH's new Terminal A could connect to the Etihad Rail network in the future, as part of its growth and interconnectivity plans. 

    Plans are in progress to link the new terminal at AUH to the UAE’s growing rail network, according to the CEO of Adac.

    Speaking to UK analytic firm GlobalData's Airport Technology during a tour of the new Terminal A at AUH, CEO Elena Sorlini said that Abu Dhabi Aviation is planning to improve the transport links to the site. 

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15698728/main.png
    Yasir Iqbal
  • Qatari firm wins Damascus airport MEP works

    19 February 2026

    Qatari firm Elegancia MEP, which is owned by local investment firm Estithmar Holding, has won a contract to undertake the mechanical, electrical and plumbing (MEP) and extra-low-voltage (ELV) systems works for the Damascus International airport Terminal 2 project.

    In a statement, Elegancia MEP said that its scope covers the execution of MEP and ELV systems works to support terminal operations, passenger facilities, safety systems and overall operational efficiency.

    The MEP works for the airport project include electrical installations; heating, ventilation and air conditioning (HVAC) systems; safety and security systems; firefighting systems; surveillance and monitoring systems; control systems; and plumbing works.

    The contract award follows the signing of the final concession contracts in November last year by Qatar’s UCC-led consortium to redevelop Damascus airport, formalising the prior memorandum of understanding (MoU) inked in August 2025 with Syria’s General Authority of Civil Aviation.

    The contract will see the consortium redevelop and expand the airport in several phases under a build-operate-transfer framework, with a view to raising total capacity to 31 million passengers annually upon the completion of all phases.

    The agreement is valued at an estimated $4bn and includes plans for the overhaul of all existing terminals, the construction of other passenger facilities and 500 kilometres of access roads, as well as the development of a commercial complex centred around a five-star hotel.

    The signing of the final concession contracts followed UCC Holding’s provisional signing in October last year of five consultancy and design agreements for planned work on the project.

    The earlier MoU designated UCC Holding as the primary developer through its investment arm UCC Concessions Investment, alongside three Turkish partners – Cengiz, Kalyon and TAV – and the US-based Assets Investments USA.

    US-based firm Synergy Consulting is the financial adviser for the consortium.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15698666/main.png
    Yasir Iqbal