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
  • Parsons wins role on Elon Musk-backed Dubai Loop project

    4 May 2026

    US-based Parsons Corporation has been appointed to deliver programme management services for the Dubai Loop transportation system.

    The contract was awarded by Elon Musk-backed firm The Boring Company, which signed a construction agreement with Dubai’s Roads & Transport Authority (RTA) in February.

    Parsons’ scope of work includes independent design verification, stakeholder management, permitting and no-objection certificate (NOC) support, and multidisciplinary design reviews for the project’s first phase.

    The first phase comprises a 6.4-kilometre route with four stations, linking the Dubai International Financial Centre (DIFC) and Dubai Mall.

    Stations will be located at DIFC 2, ICD Brookfield Place, Dubai Mall Zabeel Parking and Burj Khalifa.

    The first phase is expected to cost about AED565m ($154m) and to be delivered within one year after design work and other preparations are completed. Tunnelling is expected to begin in the second half of this year.

    Next phase

    The second phase will connect Dubai World Trade Centre and DIFC with Business Bay.

    The tunnels will extend up to 22km and include 19 stations.

    The total cost across both phases is expected to be around AED2bn ($545m), with completion scheduled within three years.

    The pilot route is expected to serve around 13,000 passengers a day, while the full route is projected to have a capacity of about 30,000 passengers a day.

    The RTA and The Boring Company signed a memorandum of understanding on the sidelines of the World Governments Summit in Dubai in February last year to explore the development of the Dubai Loop transportation system.

    The Dubai Loop is expected to be similar to The Boring Company’s Las Vegas Convention Centre (LVCC) Loop project. The LVCC Loop is a 2.7km underground tunnel system that connects different convention centre halls, reducing walking time across the site to about two minutes.

    The LVCC Loop has been in operation since 2021. It uses Tesla Model 3 cars to carry passengers between five stations. The Boring Company began construction in November 2019 at an estimated cost of $49m.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16672074/main.jpg
    Yasir Iqbal
  • Humain tenders infrastructure for 6GW data centre campus

    4 May 2026

    Saudi artificial intelligence (AI) infrastructure company Humain, owned by the Public Investment Fund (PIF), has issued a tender inviting firms to develop infrastructure for its planned 6GW hyperscale AI data centre campus in Riyadh.

    The project will be delivered on an early contractor involvement (ECI) basis. Under the ECI process, selected contractors are required to submit methodologies and design proposals, after which one team will be selected to deliver the construction works.

    Firms have until 8 May to submit proposals.

    The development will be built on a 24-square-kilometre site in the Al-Saad area in east Riyadh. It will be delivered in two phases across six plots, each with a capacity of 1GW.

    The scope of infrastructure work covers:

    • Construction of 380kV/132kV/33kV electrical distribution network, two substations with a capacity of 500MVA and 200MVA, bulk supply point (2,000MVA)
    • Water network and fire protection systems
    • Sewage treatment plant and wastewater network
    • Stormwater systems
    • Roads
    • Underground cable and fibre optic networks
    • Landscaping works

    The client is being supported by Canadian engineering firm Hatch, France’s Egis and US-based firm JLL.

    Humain was launched in May last year to operate and invest across the AI value chain.

    Humain is building full-stack AI capabilities across four core areas: next-generation data centres, hyper-performance infrastructure and cloud platforms, and advanced AI models, including Allam.

    Also in May 2025, Humain signed preliminary deals with US chipmakers AMD and Nvidia to build multibillion-dollar advanced digital infrastructure in the kingdom.

    AMD said it will invest up to $10bn to deploy 500MW of AI compute capacity in Saudi Arabia over the next five years.

    In October, PIF and Saudi Aramco signed a non-binding term sheet setting out key terms under which Aramco would acquire a minority stake in Humain, with PIF retaining majority ownership.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16671267/main.jpg
    Yasir Iqbal
  • Abu Dhabi selects consortium for 2.5GW Taweelah C IPP

    4 May 2026

     

    Register for MEED’s 14-day trial access 

    A consortium of Al-Jomaih Energy & Water Company (Saudi Arabia) and Sembcorp Industries (Singapore) has been selected to develop the Taweelah C independent power producer (IPP) project in Abu Dhabi.

    The consortium will sign a power purchase agreement (PPA) in mid-May, a source told MEED.

    The combined-cycle gas turbine (CCGT) plant will have a capacity of 2.5GW. It will be located at the Al-Taweelah power and desalination complex, about 50 kilometres northeast of Abu Dhabi city.

    It is understood that China Energy Engineering Corporation (CEEC) will be the engineering, procurement and construction (EPC) contractor.

    Last September, MEED reported that state offtaker Emirates Water & Electricity Company (Ewec) had received three bids for the facility.

    The bidders included:

    • Al-Jomaih Energy & Water Company / Sembcorp Industries
    • Sumitomo Corporation (Japan) / Korea Overseas Infrastructure & Urban Development Corporation / Korean Midland Power
    • Korea Western Power Company / Etihad Water & Electricity (UAE) / Kyuden International (Japan)

    At the time, Mohamed Al-Marzooqi, chief asset development and management officer at Ewec, said the bids would make Taweelah C “one of the lowest tariff CCGT projects in the region”.

    The carbon-capture-ready facility had been scheduled to begin commercial operations in the fourth quarter of 2028.

    This was based on the initial timeline for a PPA to be signed in the fourth quarter of 2025.

    Taweelah C is part of Ewec’s wider programme to support the UAE’s Net Zero by 2050 Strategic Initiative and the Abu Dhabi Department of Energy’s Clean Energy Strategic Target 2035.

    Ewec plans to raise solar power capacity to 18GW and wind capacity to 2.6GW by 2035, while reducing the carbon intensity of its power generation by more than half compared to 2019.

    Ewec is also expanding its low-carbon water desalination capacity, with the Taweelah reverse osmosis (RO) plant already operating as the world’s largest RO facility and additional projects, such as the Mirfa 2 RO and Shuweihat 4 RO, under way.

    By 2030, it expects 95% of Abu Dhabi’s installed water capacity to come from RO technology.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16670622/main0858.jpg
    Mark Dowdall
  • Dubai launches Blue Line metro tunnelling works

    4 May 2026

    Dubai has announced the launch of tunnelling works for the Dubai Metro Blue Line extension project.

    In a post on X, Sheikh Mohammed Bin Rashid Al-Maktoum, UAE Vice President, Prime Minister and Ruler of Dubai, announced the start of operations of the tunnel boring machine (TBM), which the Roads & Transport Authority (RTA) has named ‘Al-Wugeisha’.

    The TBM is 163 metres long, weighs more than 2,000 tonnes and will operate around the clock. The post added that its average excavation rate ranges from 13 to 17 metres a day.

    The Blue Line will connect the existing Red and Green lines. It will be 30 kilometres (km) long, with 15.5km underground and 14.5km above ground.

    The line will have 14 stations, seven of which will be elevated. There will be five underground stations, including one interchange station, and two elevated transfer stations connected to the existing Centrepoint and Creek stations.

    In December 2024, the RTA awarded a AED20.5bn ($5.5bn) main contract for the construction of the project to a consortium comprising Turkiye’s Limak Holding and Mapa Group, along with the Hong Kong office of China Railway Rolling Stock Corporation (CRRC).

    The consortium is responsible for all civil works, electromechanical works, rolling stock and rail systems. After completing the project, it will assist with maintenance and operations for an initial three-year period.

    According to an official statement, the Blue Line will have a capacity of 46,000 passengers an hour in both directions.

    The project is scheduled for completion in September 2029.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16670584/main.jpeg
    Yasir Iqbal
  • Firms submit Jeddah distribution centre bids

    4 May 2026

     

    Contractors submitted bids on 26 April for an estimated SR140m ($37m) contract to build a distribution centre in Jeddah.

    Saudi Logistics Services Company (SAL) launched the tender on 11 March, as previously reported by MEED. The project will cover an area of about 37,000 square metres. Egyptian firm Cosmos-E Engineers & Consultants has been appointed as the project consultant.

    This tender follows the start of construction by Egyptian contractor Rowad Modern Engineering, a subsidiary of Elsewedy Electric Group, on the expansion of SAL’s facilities at King Khalid International airport in Riyadh. The scope of work includes rehabilitating and upgrading existing infrastructure, as well as constructing new supporting facilities and services.

    SAL also launched the tendering process in September last year for its SR4.2bn ($1bn) logistics zone in northern Riyadh, MEED previously reported. UAE-based Global Engineering Consultants is the consultant for that development.

    The logistics hub aims to meet demand for customised warehouses near King Khalid International airport and the Riyadh Metro. The project aligns with Vision 2030 and the National Transport & Logistics Strategy, which aims to strengthen the kingdom’s logistics sector and enhance Saudi Arabia’s position as a global logistics hub.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16670338/main.gif
    Yasir Iqbal