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 Sadara halts chemical production

    1 April 2026

    Register for MEED’s 14-day trial access 

    Sadara Chemical Company (Sadara), the Saudi Aramco-Dow Chemical joint venture producing petrochemicals and specialty chemicals, has announced a temporary shutdown of production, citing ongoing supply chain disruptions.

    Sadara operates a sprawling chemical production complex in Jubail in Saudi Arabia’s Eastern Province, with a total output capacity of more than 3 million metric tonnes a year. Aramco and Dow established the Sadara petrochemicals complex – estimated to have cost $13bn – in 2016.

    The suspension was announced in a filing on the Saudi Exchange (Tadawul) by Sadara Basic ​Services, which issues sukuk, or Islamic bonds, ​for its parent. “The shutdown was successfully completed in accordance with Sadara’s high safety standards and in a manner that safeguards operations and reduces risk,” the entity said in its filing on 31 March. 

    “Sadara cannot provide, at the present ‌time, ⁠an estimate for the return to production, as this is contingent on domestic and international factors,” it said, ​adding ​the shutdown ⁠is expected to impact this year’s financial results.

    The month-long war between Israel, the US and Iran has spread across the Middle East, disrupting energy supplies and threatening the global economy, as Tehran has responded to US and Israeli attacks by targeting regional energy and industrial infrastructure, as well as shipping.

    ALSO READ: Sultan Al-Jaber calls Strait of Hormuz blockade “economic terrorism”

    Separately, Sadara, in another Tadawul filing on 31 March, announced a net loss of SR5,793bn ($1.54bn) for the full year 2025, a further decline of about 40% compared to 2024. The company’s revenue in 2025 fell by about 15% year-on-year to $2.63bn.

    The chemicals producer attributed the deepening of its losses in 2025 to a reduction in sales volumes, “which resulted from unplanned operational events and extended maintenance activities that temporarily impacted production availability”.

    Sadara also pinned its augmented losses to “margin compression, and higher fixed costs associated with unplanned operational events and extended maintenance activities.

    “In addition, the company experienced lower average selling prices across certain portfolio lines, which further contributed to the overall decrease in revenue,” Sadara said in the disclosure.

    In addition, “the net loss for 2025 increased compared to 2024, mainly due to an accounting adjustment related to a debt modification that had a favourable impact on the prior year’s results,” the company added.

    ALSO READ: Sabic registers $6.87bn net loss in 2025

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16215635/main2446.jpg
    Indrajit Sen
  • BP advances Egypt offshore gas plans

    1 April 2026

    London-headquartered BP is making progress on its campaign to drill five wells in Egypt’s portion of the Mediterranean, according to a statement from the North African country’s oil and gas ministry.

    The Fayoum 4 well is scheduled to start production in July, with an estimated output of around 100 million cubic feet of gas a day, according to the ministry.

    It said it expected the well to bolster domestic supply during the summer, helping meet demand from power stations and reducing Egypt’s import bill.

    BP is planning to invest about $1.5bn in exploration and field development in Egypt during the 2026/27 fiscal year.

    Karim Badawi, minister of petroleum and mineral resources, said that intensifying drilling for new wells is a top priority for the ministry, both to unlock fresh exploration opportunities and to increase output from existing fields.

    Egypt is currently a net importer of natural gas, and due to this, its economy is expected to be severely impacted by the recent spike in global gas prices as a result of the US and Israel’s war with Iran.

    MEED’s March 2026 report on Egypt includes:

    > COMMENT: Egypt’s crisis mode gives way to cautious revival
    > GOVERNMENT: Egypt adapts its foreign policy approach
    > ECONOMY & BANKING: Egypt nears return to economic stability
    > OIL & GAS: Egypt’s oil and gas sector shows bright spots
    > POWER & WATER: Egypt utility contracts hit $5bn decade peak
    > CONSTRUCTION: Coastal destinations are a boon to Egyptian construction

    To see previous issues of MEED Business Review, please click here

     

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16212519/main.jpg
    Wil Crisp
  • Algerian chemicals project faces delays

    1 April 2026

     

    The $1.1bn project to develop a linear alkyl benzene (LAB) plant in Algeria’s Skikda region is facing delays, according to industry sources.

    Under the terms of the original contract, it was expected to be completed over 44 months, with project execution starting in March 2024.

    One source said: “There have been some issues with the project and it is not currently progressing in line with the original schedule that was set out.”

    If the project had kept to the original schedule, it would have been completed in November 2027.

    The project client is Algeria’s national oil and gas company Sonatrach.

    When asked to comment on the delay, a spokesperson for Sonatrach said: “Please be informed that we do not confirm, deny or comment on rumours, speculation or any non-public information regarding project schedules, progress or commercial matters.”

    The main contract for the LAB project was awarded to Tecnimont, a subsidiary of Italy’s Maire, in March 2024.

    The contract it won uses the engineering, procurement, construction and commissioning (EPCC) contract model.

    It was originally tendered by Sonatrach with a technical bid submission deadline of 3 March 2023, which was then extended several times.

    The scope of the project entails the implementation of a new LAB plant with an annual production capacity of 100,000 tonnes, and the associated utilities, offsites and interconnections with the existing facilities.

    In December, China’s Jilin Chemical Construction (JCC) won a contract worth more than $100m to work on the project.

    Its contract is expected to be completed over 17 months after activation in March this year.

    JCC has said that its project scope includes engineering work “involving all disciplines”.

    JCC is wholly owned by China Huanqiu Contracting & Engineering and is affiliated to China National Petroleum Corporation (CNPC).

    Linear alkyl benzene

    LABs are a family of organic compounds mainly produced as intermediaries in the production of surfactants. Since the 1960s, LAB has emerged as the dominant precursor of biodegradable detergents.

    Hydrotreated kerosene is a typical feedstock for high-purity linear paraffins, which are subsequently dehydrogenated to linear olefins.

    Alternatively, ethylene can be oligomerised to produce linear alkenes. The resulting linear mono-olefins react with benzene in the presence of a catalyst to produce the LABs.

    Sonatrach has been planning to develop a large LAB project for at least a decade.

    In 2016, the energy major said it was planning a LAB project with a capacity of 100,000 tonnes a year (t/y) and that it would be developed in either Skikda or Arzew.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16212518/main.png
    Wil Crisp
  • Frontrunner emerges for Safaniya field expansion tenders

    1 April 2026

     

    Register for MEED’s 14-day trial access 

    Saudi Aramco is understood to be nearing a decision on contract awards for two key tenders that represent the next expansion phase of the Safaniya offshore oil field development.

    Italian contractor Saipem is said to have emerged as the frontrunner to win the two tenders – numbers 154 and 155 on Aramco’s Contract Release and Purchase Order System (CRPO) – according to sources.

    The combined contract value for CRPOs 154 and 155 is estimated at $600m, sources told MEED.

    Saipem has already secured the contract for CRPO 156, valued at about $500m, which forms the third package in Aramco’s latest Safaniya expansion phase.

    Aramco issued the three CRPOs to its Long-Term Agreement (LTA) pool of offshore contractors in February last year, with an initial bid submission deadline of 31 July. Aramco later extended the deadline to 28 August and then again to 31 August, with LTA contractors submitting bids on that date.

    The brief scope of engineering, procurement, construction and installation (EPCI) work on the three tenders is as follows:

    CRPO 154:

    EPCI of a water injection tie-in platform; two production deck modules (PDMs)/wellhead platforms; associated pipelines; hook-ups; and subsea valve skids

    CRPO 155:

    EPCI of four PDMs; intra-field and main trunklines to shore; and jackets

    CRPO 156:

    EPCI of a 48-inch trunkline, covering a distance of roughly 65 kilometres offshore and 12km onshore, from the Safaniya offshore oil field to the onshore processing facility; plus associated structures such as subsea hook-ups.

    The Safaniya field is the world’s largest offshore oil field, with a production capacity of nearly 1.2 million barrels a day (b/d). Discovered in 1951, the field is located in the Gulf waters, approximately 265 kilometres north of Aramco’s headquarters in Dhahran.

    Offshore contract awards galore

    Aramco spent almost $11bn on offshore EPCI contracts last year, which is more than double its capital expenditure on offshore projects in 2024, marking yet another year of robust upstream project spending in Saudi Arabia.

    In July, Aramco selected contractors for five CRPOs – numbers 150, 157, 158, 159 and 160 – worth over $3bn. These involve EPCI work and infrastructure upgrades at the Abu Safah, Berri, Manifa, Marjan and Zuluf offshore fields.

    The Saudi energy giant then picked contractors for four more CRPOs that are part of the large-scale project to expand infrastructure at the Zuluf offshore field development. The tenders are CRPOs 145, 146, 147 and 148, and their combined value is estimated to be almost $6bn.

    In late December last year, Saipem announced securing contracts for CRPOs 162 and 165. The scope of work on CRPO 162 covers the EPCI of two rigid pipelines – a 30-inch pipeline stretching 23.98km, and a 20-inch pipeline, 10.23km-long; replacement of a flexible 10-inch pipeline that spans 5.1km; along with modification work on topsides at the Berri and Abu Safah field developments. The duration of this contract is 32 months, Saipem said.

    The scope of work on CRPO 165, lasting 12 months, includes subsea interventions at the Marjan field development and the EPCI of 300 metres of onshore pipeline and associated tie-ins.

    MEED reported in early January this year that Aramco had selected US-based McDermott International for CRPO 166. The scope of work is understood to have been carved out of the major $15bn Marjan offshore field development project, as part of which Aramco issued contracts for 20 EPCI packages in 2019. McDermott won the largest share of work on the project, with an estimated $4.5bn-worth of contracts secured for two packages.

    The contract for CRPO 166 was single-sourced to McDermott without a competitive tendering process, and issued as a change order, sources told MEED.

    The contract award for CRPO 156 to Saipem was Aramco’s second offshore contract of this year.

    Healthy contract award pipeline

    Looking ahead, Aramco is evaluating bids it received from its offshore LTA contractors in July and August for at least three more tenders.

    These tenders are CRPO 161, which covers the EPCI of four gas jackets at the Arabiyah, Hasbah and Karan fields; and CRPOs 163 and 164, relating to the EPCI of key infrastructure at the Abu Safah, Berri, Karan, Marjan and Safaniya fields.

    MEED reported in January that Aramco had issued a new batch of five offshore tenders covering the EPCI of key structures at the Abu Safah, Berri, Manifa, Marjan and Zuluf fields, which are CRPOs 167, 168, 169, 170 and 171.

    Aramco issued the five CRPOs to its offshore LTA contractors in December, initially setting a bid submission deadline of 3 February, which it later extended until 31 March, and then further until 1 June.

    Aramco’s LTA pool of offshore service providers comprises the following entities:

    • Saipem (Italy)
    • McDermott International (US)
    • Larsen & Toubro Energy Hydrocarbon (LTEH, India) / Subsea7 (UK)
    • NMDC Energy (UAE)
    • Lamprell (UAE/Saudi Arabia)
    • China Offshore Oil Engineering Company (China)
    • Dynamic Industries (US)
    • Sapura Energy (Malaysia)
    • TechnipFMC (France) / MMHE (Malaysia)
    • Hyundai Heavy Industries (South Korea)

    Aramco renewed its LTAs last April with the following contractors, whose contracts had either lapsed or were close to expiry:

    • Saipem
    • McDermott International
    • Larsen & Toubro Energy Hydrocarbon / Subsea7
    • NMDC Energy
    • Lamprell
    • China Offshore Oil Engineering Company
    ALSO READ: Contractors submit bids for Safaniya onshore facilities project
    https://image.digitalinsightresearch.in/uploads/NewsArticle/16210634/main1930.jpg
    Indrajit Sen
  • Dubai approves $272m stimulus package

    31 March 2026

    Register for MEED’s 14-day trial access 

    Dubai has launched a AED1bn ($272m) economic support package for businesses operating in the emirate. Approved by Crown Prince of Dubai Sheikh Hamdan Bin Mohammed Bin Rashid Al-Maktoum, the measures roll out from 1 April 2026.

    The stimulus targets immediate liquidity through a broad deferral of government fees over the next three to six months. In the hospitality sector, hotels can now postpone 100% of sales and tourism fees for 90 days. This financial breathing room is designed to enhance cash flow and maintain the sector’s post-2025 momentum.

    Trade and logistics are also set for a boost via extended customs grace periods. Dubai Customs will move its data grace period from 30 to 90 days for compliant firms. Simultaneously, the government is streamlining residency permit processes. The goal is to lower the barrier for global talent entering the emirate’s labour market.

    Further structural reforms include the Virtual Warehouses Initiative to digitise the movement of temporary imports. The Council also approved the Dubai Empowerment Strategy to raise living standards for Emirati families. This is paired with a new Health and Safety Strategy for Workers’ Accommodations to improve conditions across the industrial and construction workforce.

    In a statement, Sheikh Hamdan emphasised that the package aims to turn global challenges into local opportunities. He added that the Executive Council remains focused on providing stability to families and businesses.

    Dubai’s economic support package is the latest to be announced in the UAE during the Iran War. Earlier in March, the Central Bank of the UAE (CBUAE) approved a comprehensive Financial Institution Resilience Package designed to reinforce the stability of the banking sector as the UAE economy deals with extraordinary market conditions resulting from the conflict.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16198544/main.jpg
    Colin Foreman