Slowdown looms for Saudi construction as PIF cuts contracts

• Dramatic fall in contract awards
• Reprioritisation of spending
• Growth forecast in real estate

The number of construction contracts issued by the Saudi government and the Public Investment Fund (PIF) has fallen drastically amid a decline in oil revenues and a realignment of large-scale infrastructure projects. 

The drop indicates a slowdown in the Saudi construction sector, previously one of the most vibrant in the world. Last year it accounted for more than half of the total GCC market.

Monthly data released by the Saudi Contractors Authority (SCA) shows a 77 percent drop in the total value of large-scale infrastructure contracts issued in the first five months of 2025 to SAR36 billion ($9.6 billion) compared to the SAR154 billion issued during the same period in 2024.

Contracts issued by PIF companies fell even more sharply by 84 percent. It follows a decision made in December to slash budgets by a minimum of 20 percent.

“It makes sense, given what we’ve heard through reporting rather than directly through the PIF itself,” says Tim Callen, a visiting fellow at the Arab Gulf States Institute in Washington and a former IMF official. 

“Given the oil price environment at the moment, there is a reprioritisation of where the spending is going and overall that will result at least in the short term in somewhat lower projects spending by the PIF and the government.”

The apparent scaling back follows the fall in oil price from an average of $82 last year to just over $65 currently. Saudi Aramco has cut the equivalent of $40 billion in dividends, of which the government and PIF are the main beneficiaries.

Neither the government nor PIF have officially announced wide-ranging spending cuts. Finance minister Mohammed Al-Jadaan said the kingdom would “take stock” of spending priorities in an interview with the Financial Times last month, although he also said that the government would pursue “countercyclical” investing in the event of an economic slowdown.

PIF is spearheading a series of ambitious infrastructure projects to support its economic diversification. Last year, SAR268 billion of new contracts were issued, according to the SCA. In 2023, that figure topped SAR424 billion. 

Last year, JLL, a real estate consultancy, estimated that the Saudi construction industry’s output value was worth $142 billion in 2023 and could reach $182 billion by 2028, implying a compound annual growth rate of 5 percent. 

Since those predictions were made the price of oil has fallen yet further. Last month saw the smallest value of contracts issued in more than two years, worth just SAR1.7 billion, less than one-third the value of any other month since 2021.

Taimur Khan, JLL’s head of research for the Mena region, says that the company has not yet revised down its projections for Saudi Arabia.

“There is a slowdown because we’re coming from a high base and because certain sort of big infrastructure projects are coming to more mature levels that don’t need as much spending,” he says, “but from a real estate perspective, I think that the growth is still yet to come.”

JLL predicts that as existing infrastructure projects come online, they will facilitate new investments in real estate projects. 

“Once the power is in, once all the road networks are in, all of the sewages, this is when the real estate investment really starts,” Khan says.

• PIF spending cuts slow giga-projects and trigger layoffs
• Saudi construction surge draws interest from around the world
• Aramco’s $40bn dividends drop highlights Saudi spending

In 2019 Saudi Arabia overtook the UAE to become the largest construction market in the GCC. Since then, it has grown steadily, attracting increased attention from outside investors, consultants and contractors.

Amir Greiss, CEO and founder of Abu Dhabi-based construction consultancy SharpMinds, says his company continues to see more of business coming from Saudi Arabia and is undeterred by suggestions of a slowdown. 

“The 2030 plan and the ambition is still there,” he says, in reference to the Vision 2030 economic strategy, which has come to define the kingdom’s growth priorities.

“A part of our plan that we were talking about is expanding our operations to be physically on the ground in Saudi,” he says. “We definitely believe that the Saudi market has great opportunities.”