Fiscal pressure may halt Saudi construction projects

A new report by industry experts concludes that major projects are at risk of being cancelled this year by Saudi Arabia due to fiscal pressures and changing priorities.

At least $13.3 billion of government projects are at risk of being cancelled, including a number of vanity projects, with the construction of nuclear power stations also at risk of being scrapped.

Global consultancy firm Faithful+Gould concluded in the report that about 20 per cent of Saudi Arabia’s long-term projects pipeline, worth from as much as $820 billion to as little as $168 billion of projects, could be at risk of being cancelled because of the reprioritisation programme.

Commenting on the findings, Zawya Projects, which is an online Business-to-Business (B2B) platform providing in-depth monitoring of major construction projects in the MENA region, said that contracts for major construction fell to $20 billion in 2016 from $35.5 billion in 2015.

Faithful+Goulds regional development director, David Clifton, believes that 2017 will see at least a $13 billion cut-back due to the reprioritisation programme because of fiscal pressures and realigning the project pipeline to national priorities.

Experts view 2017 as a “batten down the hatches” approach to major projects where vanity projects will be separated from essential ones. The cancellation of ten football stadiums that Saudi Aramco had been tasked with developing in major cities around the country is seen as a clear example of this trend.

2017 is also expected to be critical year for the nuclear sector which may see a $100 billion project to construct the King Abdullah City for Atomic and Renewable Energy, or KCARE, nuclear power stations put on hold.