RIYADH: Saudi Arabia experienced a 79% increase in the value of construction contracts awarded during the first quarter of 2024, reaching SR118.8 billion ($31.65 billion), according to a new analysis. This figure represents the second-highest on record, following the SR147.1 billion awarded in the third quarter of 2015. Compared to the fourth quarter of 2023, contract values surged by 35%.
The significant rise is largely attributed to major investments in the oil and gas sector, increased real estate activity driven by Vision 2030 giga-projects, and expansion in the water sector. These record figures highlight Saudi Arabia’s strategic push, marked by heightened foreign investment and key partnerships. Despite global economic challenges, this growth underscores the Kingdom’s emergence as a major hub for large-scale infrastructure projects, signaling ongoing economic progress.
“Saudi Arabia’s construction sector is seeing exponential growth, with notable developments in social and physical infrastructure, improved quality of life, and substantial foreign direct investments,” said Albara’a Al-Wazir, director of economic research at USSBC.
The report also noted a 3.1% expansion in Saudi Arabia’s non-oil economy in the first quarter of 2024, despite a 1.7% decline in the Kingdom’s GDP due to ongoing oil production cuts under the OPEC+ agreement. The non-oil economy’s resilience reflects structural changes aimed at reducing energy dependency and enhancing economic stability.
“The Kingdom’s oil and gas sector, led by Saudi Aramco, significantly contributed to the increase, with Vision 2030 giga-projects like Neom and the Red Sea development also playing a major role,” Nabil added.
The construction sector’s GDP grew by 2.4% during the same period, emphasizing its critical role in Saudi Arabia’s economic development and its position as a key center for large-scale construction.
Contract Awards Index
The USSBC Contract Awards Index climbed to 415.89 points in the first quarter, marking a 54% increase from the previous month and a 33% rise from the fourth quarter of 2023. This is the seventh consecutive quarter above the 200-point mark and 36 months above the 100-point threshold, indicating anticipated growth in construction activity.
“The CAI rose to 390.24 points in January, 438.85 points in February, and settled at 415.89 points in March, surpassing the 400-point mark for the first time since September 2013,” USSBC reported.
Oil and Gas Sector Dominance
The report highlighted a staggering 1,059% year-on-year increase in oil and gas sector projects, reaching SR51.2 billion in the first quarter of 2024. Saudi Aramco awarded two major contracts, each valued at SR6.6 billion, in January for the Riyas NGL development at the Jafurah Unconventional Gas Plant to a joint venture between Spain’s Tecnicas Reunidas and China’s Sinopec Engineering Group. In February, Aramco granted a SR6.37 billion contract to China Petroleum Engineering & Construction Corp. for the installation of eight compression trains in the Master Gas System Expansion.
Real Estate Sector Momentum
The real estate sector secured 105 contracts worth SR24.4 billion in the first quarter, a 58% increase from the previous year. Commercial real estate projects led with SR15 billion in awarded contracts, followed by residential projects at SR2.8 billion and mixed-use developments at SR1.4 billion. Notable contracts include a SR4.1 billion award for a sports stadium in Jeddah Central District and a SR3.6 billion contract for the Dammam football stadium.
Water Sector Surge
Contracts in Saudi Arabia’s water sector surged to SR24 billion across 14 deals in the first quarter, marking a 143% increase from the same period in 2023. Major projects include a SR17.6 billion contract for water dams at Trojena Mountain and a SR1.7 billion contract for a sewage treatment plant in Riyadh.
Regional Distribution
According to USSBC, the Eastern Province led in awarded contracts with SR53.1 billion, followed by Tabuk with SR24.9 billion and Makkah with SR16.7 billion.
The overall increase in contract awards reflects rising foreign direct investment, partnerships between foreign and local contractors, and a growing private sector contribution. This surge in construction contracts underscores Saudi Arabia’s rising prominence as a top destination for major infrastructure investments, with ongoing high investment and strategic partnerships poised to drive sustained development.
