Bright outlook for Middle East’s biggest construction market
With about $920bn of construction and transport projects planned and about $58bn of construction contracts being tendered, Saudi Arabia is by far the Middle East’s biggest construction market, accounting for 54 percent of all construction and transport projects planned in the region.
Driven by Riyadh’s Vision 2030 national development agenda for the diversification and privatisation of the giant Saudi economy, which includes a raft of vast megaprojects such as the $500bn Neom future cities, Qiddiya entertainment city, and the Red Sea Project, the kingdom offers the region’s biggest pipeline of future construction opportunities.
Yet, even with such enormous potential, the Saudi construction market is facing many challenges as a result of the impact of the Covid-19. The kingdom’s construction industry has been severely hit by the impact of the pandemic with the pace of construction contract awards falling sharply in 2020 and 2021. According to GlobalData, Saudi Arabia’s construction output contracted -1.9 per cent in 2020.
Impact of Covid-19
$13.4bn of construction and transport project contracts were awarded in Saudi Arabia in 2020, down 12.2 percent on the $15.3 of awards made in 2019, and 38 per cent less than the $18.5bn average annual value of awards since 2010.
The pace of awards has slowed further in 2021, with only $5.7bn-worth of construction and transport project contracts awarded in the first half of the year.
Nonetheless, with some $58.3bn of construction contracts being tendered at the end of June, the prospects are good for a rapid acceleration in the pace of awards in the remainder of 2021 and 2022.
These projects will deliver a rebound in the kingdom’s construction activity with construction output forecast to increase by 3.3 per cent in 2021.
Boosted by stimulus spending aimed at accelerating the post-Covid recovery, Saudi Arabia’s contractors, engineers and manufacturers can look forward to an increase in building and infrastructure projects in the coming two years. And while government support will stimulate activity in the near term, the long-range outlook is boosted by improving fiscal conditions as oil prices recover and output caps are eased.
In addition to its return to strong growth, the Saudi construction sector is also undergoing a dramatic transformation in the way that it operates. The kingdom’s Vision 2030 projects are being delivered by new generation of clients, whose focus is on the development of local capacity. Anybody seeking to work in Saudi Arabia must invest in local content.
At the same time, the growing use of public-private partnerships (PPPs) to deliver public services will see a new breed of private-sector clients for infrastructure projects. This will change relations between clients and their contractors and adds private-sector drive to the need to innovate and reduce waste.
Saudi Arabia Construction 2021 is a comprehensive analysis of the key trends, opportunities and challenges facing the kingdom in 2021 and 2022.
The report provides construction companies, contractors, suppliers, manufacturers and consultants with a powerful resource that will help them to identify new opportunities, set strategy, and mitigate risk in Saudi Arabia.