Key Drivers for Saudi Arabia Construction Market

Rebounding from the adverse effects of the pandemic, five key drivers that will bolster the development of the construction market in the Kingdom of Saudi Arabia (KSA) have been identified. These opportunity growth drivers are not only relevant to domestic contractors but to foreign ones as well. 

Taking into account the diverse populace and dynamic nature of Saudi Arabia as a nation, these drivers were crafted in consideration of specific components, namely: economy, governance, and society. Moving forward, these drivers will be important to new and old construction market entrants alike.  

Key Drivers for KSA Construction Growth 

In order to better understand the importance of these drivers, it is essential to be familiar with two relevant goals. Namely, (1) gradually increasing the urban population share of settlement sizes with fewer than 300,000 people by promoting development in Tier 2 towns and cities; and (2) improving upon the oil versus non-oil government revenue split so as to reflect diversification away from oil.  

Given these goals, the YCP Solidiance white paper ““Partnering for Success in Saudi Arabia Construction” has identified the following drivers that will be vital to the development of the KSA construction market: 

  • GDP Recovery – The COVID-19 pandemic led to a 14% decline with a loss of 112 billion in 2020, but the Saudi GDP is expected to rebound quickly. With a growth rate of approximately 5.6% between 2020 – and 2025, the 2025 annual GDP is forecasted to reach 895 billion USD.
  • Government Commitment to Diversifying – Traditionally, the KSA’s economy has been heavily reliant on oil as a source of revenue. With the government expressing a desire to diversify via exploration of non-oil sources, this trend is expected to drive mass development throughout the country.
  • Saudi Vision 2030 – To ensure that economic diversification takes place, the government has firmly implemented Saudi Vision 2030 as a strategic framework. Primarily supported by the Public Investment Fund (PIF), projects developed within the private sector are expected to spearhead diversification efforts.
  • Addressing Developmental Needs – In 2020, the KSA’s population was approximately 35 million and by 2050, it is projected to reach ~45 million. Thus, addressing the needs of the growing urban population will likely be a significant factor in dictating construction market trends in the coming years.
  • Foreign Investment – Putting an emphasis on transparency and compliance, the KSA government will look to drive foreign investment in the domestic construction market. Doing so will not only strengthen global presence but also motivate private sector participation.

While these drivers are important for potential investors to consider before entering the KSA construction market, it is also relevant to any businesses and professionals situated in other industries as it is indicative of the general business landscape in Saudi Arabia. Moving forward, these drivers can be adapted and contextualized to fit specific needs as they can help guide smart business practice. 

Write a Comment

Your email address will not be published. Required fields are marked *