The construction sector in Saudi Arabia is expected to rebound this year, benefiting from the Kingdom’s sovereign wealth fund Public Investment Fund’s (PIF) decision to direct more funds to the local economy.
According to the US-Saudi Business Council (USSBC), contract awards in the kingdom fell by about 60 percent in 2020, to reach $21.2 billion due to movement constraints to halt the spread of COVID-19, global supply chain disruptions, and declines in manpower ability. USSBC pointed out “as the global economy crawls back to a new normal, the role of the PIF will be instrumental in developing the local economy.”
To deal with the pandemic’s effects, the Arab world’s largest economy raised spending by $42 billion in 2020. However, capital expenditure was reduced from a budgeted $46 billion to $37 billion, directly impacting construction.
The PIF’s five-year plan, which began in January, aims to more than double the size of its assets under management to $1.07 trillion by 2025, and commit $40 billion annually to domestic economic development. The USSBC stated that its contribution “will lessen the burden on the government, which has shouldered much of the capital expenditures over the years,” by offering up to 85 percent of the government’s newly announced $6 trillion in available investment opportunities.
Mr. Albara’a Alwazir Director of Economic Research USSBC pointed out “although the PIF outlined 13 sectors that will be the focus of its strategic plan, we have already seen the impact on the construction sector. One of the biggest beneficiaries of this strategy in 2021 will be the real estate sector.”
By the end of the year, when it started work on its first community in Riyadh, the PIF’s Roshn company, which was launched in August last year to establish urban communities across the kingdom, had already begun awarding contracts. The fund is also continuing to finance a range of main projects in the kingdom, including the $500 billion Neom cities, the Red Sea Development Project, the Qiddiya entertainment city, Diriyah Gate, Al Ula, and others.
Saudi Binladin Group, the parent company of Saudi Arabia’s largest contractor, announced earlier this week that it would meet with its lenders on Wednesday to provide more clarity on its restructuring plans.
Binladin International Holding Group said that it “operates in a market with substantial opportunities” that could allow the company to regain its market leadership once it has been recapitalized. These include “the Giga and mega-development projects currently underway as well as the massive contracts award growth expected in the kingdom”, the company further added.