With the Saudi Public Investment Fund (PIF) pushing for more projects spurred by improved macroeconomic fundamentals and the uptick in contract awards over five consecutive quarters, industry experts believe Saudi’s construction market will soon be back to its pre-pandemic levels this year.
In 2021, the contracts industry registered a 78 percent rise in activities as compared to 2020, according to the US-Saudi Business Council (USSBC). Experts expect this upward momentum to continue in 2022.
The increase last year, however, was still below the levels the industry saw in 2013 and 2014 during the boom in oil prices, said Albara’a Al-Wazir, a top economist at USSBC.
This current push is mainly the result of the PIF spending on projects like NEOM and The Red Sea Development Co. as well as the increase in capital investments by Saudi Aramco, which plans to raise its oil and gas production capacity further.
Moreover, Saudi’s PIF may invest hundreds of millions of dollars in four local construction firms as it looks to bolster the industry.
“The region will witness considerable investments in the medium to the long run with government entities such as the PIF and policies such as the National Investment Strategy injecting liquidity into sectors will result in further growth,” said Al-Wazir.
“The National Investment Strategy expects to inject a substantial 5 trillion riyals, even as the PIF has intended to infuse 150 billion riyals per year till 2025. All these will translate and cascade into the growth of construction activities,” he added.
Contracts valued at 142 billion riyals
Spurred by improved macroeconomic fundamentals and the resurgence of the industry post-pandemic, Saudi Arabia’s awarded construction contracts reached 142 billion riyals ($38 billion) in 2021 with the fourth quarter alone registering 70.2 billion riyals, the highest in nearly six years, USSBC estimated.
In terms of sectors, the oil and gas sector awarded contracts worth 34.9 billion riyals in the fourth quarter of 2021, followed by the power sector at 12.1 billion riyals and real estate at 7.6 billion riyals.