Saudi Arabia construction spending forecast to fall by 20 per cent

Saudi Arabia’s government is expected to spend US$29.9 billion on construction projects in 2016 and the same amount again in 2017, despite the global oil price slump, experts are predicting.

According to the cost consultant Faithful + Gould (F+G), the state construction budget for this year is 20 per cent lower than last year’s budget, reflecting the 65 per cent collapse in the price of Nrent crude since its summer 2014 highs of around $115 per barrel.

F+G said that the revisions had been made as the government cut back on spending in an attempt to shore up public finances.

It said the kingdom’s lower budget of $229bn for this year will result in “a large number of projects either being scaled down and revised or put on hold indefinitely”.

F+G predicted that construction sector spending would return to their previous levels in 2018. “[Although the new budgets] reflect a new and cautious attitude towards spending,” said David Clifton, the regional business development director of F+G, “they reaffirm the kingdom’s commitment to its growth and development”.

Mr Clifton added, “Concurrently the country has initiated efforts to develop different funding models that go beyond the country’s historical reliance on oil revenues such as PPP to supplement its still considerable spend. ”

Public private partnership (PPP) financing was used to fund the development of Medina airport last year and plans to use a similar funding model to build Taif airport are currently in tender.

Speaking at a professional development seminar in association with the Saudi Council of Engineers, Mr Clifton said that more than 30 per cent of the country’s workforce is employed in the infrastructure and construction sectors.

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