Saudi Construction Trends in 2025: Real GDP Up by 3.2%—But the Sector Shows Mixed Signals
Saudi Arabia’s construction sector posted a real GDP increase of 3.2% in Q1 2025 year-over-year, pointing to continued infrastructure activity despite broader regional contractions. Seasonally adjusted real GDP growth stood higher at 4.4%, while nominal GDP rose 4.5%, reaching SAR 92.0 billion compared to SAR 88.0 billion in Q1 2024.
These gains reflect lingering momentum from megaprojects like Neom and the King Abdullah Financial District—yet the story isn’t purely upward.
72% Plunge in Saudi Construction Contracts in Q2 2025
After a relatively stable Q1, Q2 painted a far more turbulent picture. Saudi Arabia saw a staggering 72.5% drop in construction contract awards, the steepest decline among Gulf Cooperation Council (GCC) countries. The overall GCC market shrank by 58% compared to Q2 2024, amounting to just $28.4 billion in awarded contracts.
This signals a rethinking of high-profile commitments, especially with global oil prices sliding to $68.53 per barrel—down more than 30% from 2022 highs.
Neom: A $1.5T Dream Now Scaling Down?
Neom—the cornerstone of Saudi’s future-facing ambitions—has been notably downsized. Originally planned to host 1.5 million residents by 2030, projections now place population targets at fewer than 300,000. Of the proposed 170km straight-line city “The Line,” only 2.4km is expected to be completed by the decade’s end.
Layoff plans affecting up to 1,000 full-time staff and site relocations to Riyadh underscore cost-cutting measures. These developments are reshaping Saudi Construction Trends and tempering earlier optimism.
UAE Overtakes Saudi Arabia in New Contract Activity
While Saudi scales back, the UAE is quietly overtaking its neighbor. Despite a year-over-year drop of 47% in awarded contracts, it now leads the Gulf in construction activity. This shift reveals a redistribution of regional investment focus, and potentially signals a recalibration of competitive advantage in the GCC’s urban development race.
Budget Austerity and Energy Prices Reshape the Outlook
Saudi Arabia’s cutbacks appear closely tied to lower oil revenues and stricter budget allocations. With Brent crude showing persistent softness, the kingdom is reining in spending—even on key strategic infrastructure.
This cautious stance marks a distinct pivot in Saudi Construction Trends, characterized more by optimization than expansion.
Final Takeaway
The duality of rising GDP and shrinking contract volume suggests that Saudi Arabia is entering a more selective, ROI-driven phase in its development strategy. Projects like Neom remain active but scaled down, and regional leadership in construction is quietly shifting.
In 2025, Saudi Construction Trends are no longer defined by sheer size—but by strategic recalibration, fiscal prudence, and a new kind of ambition.
Also Read: Adapting Saudi Giga Projects Amid Fiscal Constraints: A Strategic Outlook
