Saudi Arabia has a pipeline of $1.5 trillion in unawarded construction projects in light of the kingdom’s Vision 2030 giga projects and infrastructure developments ahead of the upcoming Expo 2030, a new report has said.
Not only that, Saudi Arabia accounts for a 39 percent share of the total MENA pipeline value of $3.9 trillion, JLL’s latest KSA Construction Market Intelligence Report said.
Within the kingdom’s pipeline, the construction (assets) sector represents $950 billion (62 percent), while transportation, infrastructure, and other utilities account for $582 billion (38 percent).
“Despite challenges such as persistent inflation, elevated interest rates, geopolitical tensions, in Q1 2024, and the potential impact of the US presidential election in Q2, JLL maintains a positive outlook for KSA. According to MEED Projects, the thriving KSA construction sector reported the highest value of awarded projects in 2023, reaching $97 billion compared to $60 billion in 2022. Aligning with the kingdom’s Vision 2030 economic diversification and investment goals, this value represents only 6 percent of the potential pipeline, highlighting substantial opportunities within the sector,” the report said.
“Economic growth, burgeoning population, and modernisation have made Saudi Arabia the most active player in the Middle East construction market, with the real estate sector leading the kingdom’s projects market in 2023. The impressive resilience of the sector in the face of global uncertainties points to the success of the kingdom’s economic diversification strategies. As market dynamics continuously evolve, the impact of construction costs on the sector’s robust growth cannot be ruled out, and other market constraints such as shortage of skilled labour, resource availability, and an overheating market could place undue pressures on the kingdom’s construction activity,” said Laura Morgan, Market Intelligence Lead MEA, JLL.
Saudi Arabia’s robust growth
Saudi Arabia’s Riyad Bank has attributed the kingdom’s overall growth in Q1 2024 to robust domestic demand conditions and increased business activity driven by a rise in new orders and significant improvement in the non-oil economy.
The kingdom’s ongoing drive for economic diversification touched a new milestone last year when non-oil activities accounted for 50 percent of the country’s GDP, surpassing the contribution of oil activities (33 percent). Tourism, which contributes seven percent to the non-oil GDP, showcased strong performance in 2023 with domestic and international tourists generating $66 billion in expenditure while in construction, the leisure and hospitality sectors remained dominant, representing $4 billion, or 23 percent, of the total value of projects awarded as of Q1 2024.
Riyad Bank’s Purchasing Managers’ Index, which measures the prevailing direction of economic trends in manufacturing and services, declined slightly to 57.0 in March 2024 from 57.2 in the previous month. A decline in employment levels was also evident as construction companies sought to manage costs and cash flow in Q1 2024.
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