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
  • Consultants appointed for Oman mountain destination

    19 January 2026

    London-headquartered engineering firm TP Bennett, Australia’s Robert Bird Group and local firm NJP Oman have been appointed to the design team for Al-Jabal Al-Aali – previously known as the Omani Mountain Destination – a new development on Jabal Al-Akhdar, 150 kilometres from Muscat.

    The destination, being developed by Oman’s Ministry of Housing & Urban Planning, will be the country’s highest-altitude development, at 2,400 metres above sea level.

    Canadian engineering firm AtkinsRealis has prepared the masterplan for the $2.4bn destination, which will include 2,537 housing units, 2,000 hotel rooms, and a health and wellness village called ‘The Vessel’. 

    There will also be a biodiversity centre, health and wellness areas, a high-altitude sports training centre, amphitheatres, museum and parks, and public spaces.

    The development will also include Wadi Al-Harbi Park. It will be served by a new cable-car system and other transport infrastructure under way in the area, including a new access road from the north.

    Oman has launched a series of cities and destinations as part of its Vision 2040.

    These projects form part of the Oman National Spatial Strategy (ONSS), which Sultan Haitham Bin Tariq approved in March 2021 to guide urban growth in the sultanate for the next 20 years.

    The ONSS, which sits within the Ministry of Housing & Urban Planning, is responsible for ensuring projects are located appropriately and for overseeing the development of a new generation of cities across the sultanate.

    The Al-Jabal Al-Aali project began as an idea when Sultan Haitham visited his assets in the area shortly after becoming sultan in 2020. After the visit, he decided to use his land to create a global destination.

    The altitude is crucial because it offers a cooler retreat for those seeking to escape the Gulf’s extreme summer heat.

    Traditionally, property ownership on the mountain was restricted to people from Jabal Al-Akhdar. Under the new development, property will be sold to other Omanis as well as foreign nationals.

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

    Saudi Arabia courts real estate investment; EVs and battery production are key regional tech themes; Muscat holds a steady growth course despite headwinds

    Distributed to senior decision-makers in the region and around the world, the January 2026 edition of MEED Business Review includes:

    > ECONOMIC ACTIVITY INDEX: UAE and Qatar emerge as markets to watch
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/15464386/main.gif
    Yasir Iqbal
  • Oman Ibri 3 solar IPP reaches financial close

    16 January 2026

    Abu Dhabi Future Energy Company (Masdar) and its consortium partners have achieved financial close on the Ibri 3 solar independent power project (IPP) in Oman.

    The project is the sultanate’s first utility-scale solar photovoltaic plant integrated with battery energy storage.

    In a statement, Masdar said financing has been secured from Natixis Corporate & Investment Banking and First Abu Dhabi Bank (FAB). The facilities will cover a substantial portion of the project’s total cost of about $300m.

    The Ibri 3 project will comprise a 500MW solar photovoltaic plant and a 100MWh battery energy storage system. It is being developed for Nama Power & Water Procurement (Nama PWP).

    The consortium developing the project includes Masdar, Korea Midland Power, and local firms Al-Khadra Partners and OQ Alternative Energy.

    The firms signed a power purchase agreement (PPA) with Nama PWP on 22 September, in a ceremony attended by Salim Bin Nasser Al-Aufi, energy and minerals minister.

    China Power Engineering Consulting Group (CPECC) signed the engineering, procurement and construction (EPC) contract for the project in November.

    Once operational, the plant is expected to generate enough electricity to power around 33,000 homes. It will also avoid approximately 505,000 tonnes of carbon dioxide emissions each year.

    The plant will be built in the wilayat of Ibri in Al-Dhahirah Governorate. It will be located on a 10 million-square-metre site next to the 500MW Ibri 2 solar IPP, which was inaugurated in January 2022.

    The project supports Oman Vision 2040, which includes a target to generate 30% of electricity from renewable sources by 2030.

    Commercial operations are scheduled for the first quarter of 2027.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15454675/main.jpg
    Mark Dowdall
  • Chinese firm’s Riyadh skyscraper debut signals a shift

    16 January 2026

    Commentary
    Yasir Iqbal
    Construction writer

    Riyadh is in the middle of a skyline surge. The cranes are easy to spot. What’s easier to miss is the quieter change happening behind the scenes: who is actually designing these towers.

    In January, China Southwest Architectural Design & Research Institute (CSWADI) won a design contract for a two‑tower, roughly 110,000‑square‑metre mixed‑use development in northern Riyadh. The project sits near the bustling business district of King Abdullah Financial District and is guaranteed to be a highly visible feature on Riyadh’s skyline once built.

    The more interesting angle is what this represents. Chinese contractors are prominent players in the region’s construction industry. But a Chinese architecture and engineering consultancy leading the design of a skyscraper in Riyadh is a different move, possibly one of the first times a Chinese firm is properly leading the project from the outset in the Saudi capital.

    In hindsight, it makes sense. China has spent decades building skyscrapers at a pace the rest of the world has not matched. The sheer volume has created serious practical expertise that has shaped Chinese firms into strong players on the international stage.

    The shift is visible in the global consulting market as well. Western firms still dominate the top tier, especially for the statement architecture. But Chinese engineering and design groups have been climbing steadily in global rankings, helped by an integrated model that combines architecture with engineering and delivery discipline.

    For Riyadh, that approach bodes well as it boasts a strong pipeline of towers. The question, of course, is local fit. Can a firm shaped by China’s high-speed tower culture produce buildings that feel right for Riyadh? If it can, this will not look like a one-off. It will look like the start of a broader shift in who gets to shape the city’s skyline.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15454486/main.jpg
    Yasir Iqbal
  • Qatar enters 2026 with heady expectations

    16 January 2026

     

    Heading into 2026, Qatar is armed with the most optimistic real GDP growth forecast of any country in the region – a heady 6.1% growth rate, outstripping the closest GCC rival by a full percentage point, according to the IMF. It also represents a significant jump from Qatar’s 2.9% real GDP growth rate in 2025, for reasons that are fairly apparent.

    The near-term macroeconomic picture for Qatar is also extremely robust. Globally, natural gas demand returned to growth in 2024, and expansion continued in 2025. Natural gas prices likewise remain robust – more so than oil prices – and are now being supported by rising energy use associated with the global artificial intelligence data-centre build-out. Momentum in the non-hydrocarbon sector has also been steadily building, with growth surging to 4.4% year-on-year in the third quarter of 2025.

    The decisive catalyst, nevertheless, remains liquefied natural gas (LNG). Amid stable prices and rising demand, Qatar continues to expand capacity at pace. The phased start-up of the North Field East expansion – with its first train expected to enter service in mid-to-late 2026, and additional capacity coming online through 2027 – is expected to lift LNG output to 126 million tonnes a year, reinforcing gas’s dominance of Qatar’s export earnings while delivering higher cash flow and multiplier effects across the economy.

    Between Qatar’s hydrocarbon receipts and inbound investment on the one hand, and its relatively modest import requirements on the other, Doha is currently nurturing a double-digit current account balance. This is underpinned by LNG exports and steady demand from Asian partners, with China remaining Qatar’s largest trading counterpart. Despite its wide trade surplus, the country’s fiscal balance is nevertheless walking a tightrope between surplus and deficit as Doha commits every spare riyal to strategic spending.

    Capital expenditure

    Project spending in the country has been buoyant for the past five years, with an average of more than $20bn in contract awards annually and rising above $22bn in each of the past two years. This is a sharp step up from an average of $14bn in annual awards from 2016 to 2020. At the same time, project awards have outstripped completions, driving the total value of work under execution in the country up by $39bn over the past five years.

    In total, Qatar now has more than $100bn-worth of projects under execution – a level of active project work that is 25% higher than the UAE’s in terms of value per capita. Of this, roughly 80% is in the energy and industrial sectors, with the remainder divided among other sectors.

    In the energy sector, approximately $45bn in value is split across the North Field East, North Field South and North Field Production Sustainability schemes, highlighting the enormous investments being made in expanding gas production capacity. While Qatar has never stepped back from continuous hydrocarbon investment, current market conditions are clearly boosting confidence in both current and future investment in the gas sector.

    Looking ahead, there are similarly expansive developments to come, with a further $100bn-worth of projects moving through pre-execution. In addition to further gas sector work, including the $18bn North Field West scheme, there is also $38bn in upcoming transport projects, including $28bn in prospective rail expansion plans across both the Doha Metro and passenger and freight rail. This is in addition to $11bn in rail schemes currently under way across the Doha Metro and Lusail Light Rail.

    While Qatar’s economic diversification plans entail far more than just projects, the scale of project activity is turbocharging non-hydrocarbon growth. A buoyant projects sector attracts expertise, skilled workers and families, and boosts real estate, retail, leisure and the services economy.

    A year ago, MEED noted that Doha’s economy was re-emerging from its post-World Cup slump, and this trend has continued. As of mid-2025, accommodation and food services were expanding at double-digit rates. Inflation, by contrast, remains subdued. Consumer prices are estimated to have risen by just 1.4% in 2025 and, while a modest pick-up to 2.6% is expected in 2026, price stability remains one of Qatar’s quieter advantages.

    In 2026, the budget announced by the Ministry of Finance commits a further QR62.8bn ($17.2bn) of the QR220.8bn ($60.5bn) total spend to capital expenditure, up by 5% from QR210.2bn in 2025. It projects a modest deficit to be financed through debt issuance – a deliberate choice, rather than a necessity – demonstrating Doha’s firm commitment to counter-cyclical strategic spending.

    Anchoring this spending are both Qatar’s diversification-oriented National Vision 2030 and ongoing critical infrastructure plans. Ashghal’s five-year infrastructure programme (2025-29) totals QR81bn ($22.2bn). Social infrastructure plans also anticipate $7bn in school and hospital projects being awarded either this year or next – clear commitments to the education and social-welfare pillars of the 2030 vision.

    Governance shifts

    In the political landscape, the constitutional referendum of November 2024 marked a turn away from elected legislative representation after the 2021 elections led to social frictions. In October 2025, the Shura Council reverted to full appointment by the emir. The result is a structure that once again prioritises top-down policy execution, favouring agility over participatory experimentation.

    Businesses operating in the country face slightly stricter conditions. The Qatarisation Law, fully effective from April 2025, obliges private firms to prioritise Qatari nationals, tightening the labour market. The January 2025 introduction of a 15% global minimum tax for multinationals, meanwhile, aligns Qatar with OECD standards.

    Judicial reforms, including a specialised enforcement court and digitised auctions, aim to shorten dispute-resolution timelines, while an anti-corruption strategy spanning 2025 to 2030 seeks to institutionalise transparency across the public and private sectors.

    A keen eye for potential corruption is necessary as the Ministry of Finance schedules the launch of 4,464 tenders worth more than QR65bn under the Government Procurement Plan for 2026 – many structured to encourage public-private partnerships.

    Qatar’s two brushes with broader Middle East conflict in the past year – both the Iranian strike on the Al-Udeid Air Base in June in retaliation for US strikes on Iran, and the Israeli strike on a Doha suburb in September targeting Hamas political leaders – have, meanwhile, seen the country emerge with stronger security guarantees from the US.

    While there remains a chance that the US installation at Al-Udeid could draw Qatar back into tensions with Iran, for now the geopolitical ripples from last year have died down.

    The main thing on the horizon for Doha is exactly what the government has set out: ambitious spending, LNG growth, project sector expansion and an unswerving focus on using today’s gas receipts to build an economic ecosystem that endures.

    MEED’s February 2026 report on Qatar also includes:

    BANKING: Qatar banks search for growth
    OIL & GAS: QatarEnergy achieves strategic oil and gas goals in 2025
    POWER & WATER: Dukhan solar award drives Qatar’s utility sector
    CONSTRUCTION: Infrastructure investments underpin Qatar construction

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15443749/main.gif
    John Bambridge
  • Lowest bidder emerges for Kuwait investment authority HQ

    16 January 2026

     

    Kuwaiti firm Mohammed Abdulmohsen Al-Kharafi & Sons has emerged as the lowest bidder for a contract to build the permanent headquarters of the Kuwait Direct Investment Promotion Authority (KDIPA).

    According to results published on the Kuwait Central Agency for Public Tenders (Capt) website, the firm submitted a bid valued at KD52.9m ($172m).

    The client accepted bids from six other bidders, which include:

    • Alghanim International General Trading & Contracting (local) – $199m
    • United First General Trading & Contracting Company (local) – $214m
    • China State Construction Engineering Corporation (China) – $233m
    • Kuwait Company for Plant Construction & Contracting (local) – $236m
    • Al-Ahmadiyya Contracting & Trading Company (local) – $242m
    • Limak Holding (Turkiye) – $285m

    Two companies were excluded from bidding due to technical reasons. These include Turkiye’s Kuzu Toplu Konut and the local firm Sayed Hameed Behbehani & Sons.

    The project will be located in the Sharq area of Kuwait City.

    The tender was issued on 19 October, and bids were submitted on 18 November, as MEED reported.

    Kuwait market overview

    London-headquartered analytics firm GlobalData expects Kuwait’s construction industry to average annual growth of 4.9% between 2026 and 2029, supported by government investment in renewable energy and transport infrastructure.

    In September 2025, Kuwait’s government allocated KD1.3bn ($4.2bn) for 141 projects, as part of its capital spending during the fiscal year 2025-26. This allocation was intended for 162 current projects and 17 new projects.

    According to government data, as of September 2025, the country had around 300 active projects, valued at about KD35.3bn ($115bn), with large infrastructure projects making up nearly half of that total.

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

    Saudi Arabia courts real estate investment; EVs and battery production are key regional tech themes; Muscat holds a steady growth course despite headwinds

    Distributed to senior decision-makers in the region and around the world, the January 2026 edition of MEED Business Review includes:

    > ECONOMIC ACTIVITY INDEX: UAE and Qatar emerge as markets to watch
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/15452091/main.jpg
    Yasir Iqbal