Contract awards in Saudi Arabia dropped by a further 27 per cent quarter-on-quarter to just 20.3 billion Saudi riyals (Dh19.88bn), and are 75 per cent lower than the 82.8bn riyals awarded in the corresponding period last year.
Research from the kingdom’s National Commercial Bank (NCB) stated that the decline was mainly owing to the lack of large contract awards by the Saudi government as it attempts its fiscal restructuring.
NCB said that in May, just 3.1bn riyals of new contracts were awarded, which was the lowest figure experienced since April 2010. Momentum on proposed new metro projects in cities such as Jeddah, Medina and Dammam were stalling, it said, with most of the work that was awarded from the energy and petrochemicals sectors.
One single contract award during the quarter – a 6.5bn riyals deal on a joint venture between India’s Larsen & Toubro and Singapore’s Emas for an offshore gas project for Saudi Aramco – made up 32 per cent of the total value.
Contract awards for the first half of 2016 total 48.2bn riyals, which is two-thirds lower than the 140bn awarded a year earlier. NCB said that the slowdown is likely to continue for the remainder of this year and into 2017.
“Given the vital role the projects market plays in keeping the economy growing, a further suspension of contract awards would have an adverse impact on the construction sector,” it said.