Time for Riyadh to prove its mettle

18 August 2023

Commentary
Colin Foreman
Editor

Economic data reported from Saudi Arabia recently has spooked the market at a pivotal time for the projects sector.

For the broader economy, the Washington-based IMF downgraded its real GDP growth projection for Saudi Arabia in 2023 to 1.9 per cent. The fund had in April anticipated a growth rate of 3.1 per cent for the year.

Then, the General Authority for Statistics (Gastat) confirmed that the Saudi economy had contracted during the second quarter of this year. London-based Capital Economics said the Saudi economy was now technically in recession.

There was also data for the kingdom’s largest ultimate project client – and the vehicle tasked with delivering much of Vision 2030 – the Public Investment Fund (PIF). In July, Bloomberg reported that the fund made an investment activity loss of about $11bn in 2022, in sharp contrast to the $19bn profit reported the previous year.

Jitters remain about whether Saudi Arabia’s new wave of projects will all be delivered as planned 

The data has stoked lingering concerns for the projects sector that the Saudi market may fail to deliver again. In 2014, companies were gearing up to work on a wide range of ambitious construction projects only to have those plans dashed by a collapse in oil prices and a resulting period of project austerity.

The data released recently is nowhere near as damaging as the 2014 collapse in oil prices, but it has shown that jitters remain about whether Saudi Arabia’s new wave of projects will all be delivered as planned.

While Riyadh will not welcome the recent data, it does present an opportunity. If the kingdom can press ahead with capital spending plans despite short-term bumps in the road, it will reinforce its claims that these projects are different to those in the past because they are long term and they will be delivered.

 

 

https://image.digitalinsightresearch.in/uploads/NewsArticle/11080736/main.gif
Colin Foreman
Related Articles