CIC - Construction Intelligence Center

Construction in Saudi Arabia remains weak, but there will be a return to growth

16 May 2017

Saudi Arabia’s construction industry suffered a sharp reversal in 2016, when output value contracted by 1.9% in in real terms, following average annual growth of 6.2% during the preceding four years. According to a report by Timetric’s Construction Intelligence Center (CIC), the industry will remain sluggish in 2017 before picking up in the following few years.


The slowdown in the industry has been due to the sharp fall in oil prices and the country’s high fiscal deficits; both of which reduced the government’s spending power. Since mid-2014, oil prices have fallen by more than 50%, limiting government spending. To cope with declining oil prices, the government cut subsidies and public spending, privatized economic activities and increased domestic fuel prices and taxes. Falling oil prices forced the government to reduce its 2016 budget by 2.3% from SAR859.3 billion (US$229.1 billion) in 2015 to SAR840.0 billion (US$224.0 billion) in 2016.


The country’s construction industry is expected to contract further in real terms in 2017 by 0.2%, before regaining growth momentum. Growth over the forecast period (2017–2021) as a whole is expected to be supported by the government’s focus on developing transport infrastructure, energy and utilities facilities, and affordable housing across the country. The Saudi construction industry is expected to rise from US$103.1 billion in 2016 to US$105.4 billion in 2021, measured at constant prices and 2010 US dollar exchange rates.


There are key policies and investment programs that should help to boost construction. Under the National Transformation Program (NTP) 2020 and the Saudi Arabia Vision 2030, the government plans to develop sea ports, railway lines, airports and manufacturing facilities, with an aim to reduce the country’s dependency on the oil sector and reduce unemployment. Under the NTP 2020, the government plans to invest SAR268.0 billion (US$71.5 billion) to develop the country’s transport and tourism infrastructure. Furthermore, under the country’s Vision 2030, the government plans to make Saudi Arabia a global trade hub. Moreover, under Vision 2030, the government plans to increase the private sector's contribution from 40% of the country’s GDP in 2015 to 65% by 2030. 



About this report


This information is taken from the Timetric report: ‘Construction in Saudi Arabia, Key Trends and Opportunities to 2021’


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