Saudi Arabia’s construction industry saw a sharp quarterly slide and is expected to contract by 2.8% this year, a report from GlobalData has found.
According to the report, the contraction is in line with expectations of a severe decline in construction output in Saudi Arabia in Q2 2020, amid falling oil prices and the COVID-19 pandemic, the report said.
The Saudi government’s swift introduction of integrated stimulus and support measures to struggling industries such as construction, locking down sectors of the economy, and cuts and delays in capital spending, have all put a strain on the Kingdom’s budget, it added.
The removal of the cost of living allowance and tripling the VAT rate to 15% were stringent policies that the Kingdom had to push for, the report said.
Although recovery will be slow as the Kingdom copes with the aftershocks of oil market collapse and the global pandemic, the outlook remains promising on the back of Vision 2030. The future growth of the Kingdom is bound with private investment so realizing income diversification and weaning the economy off its oil dependency is deemed essential in building a sustainable economy,” said Yasmine Ghozzi, economist at GlobalData.
“Saudi Arabia’s construction sector shrank by 4.7% in Q2 2020. The Kingdom’s GDP contracted by 7% in real terms in Q2 2020. This negative growth originated mainly from the contraction in the non-oil sector by 8.2%, and the oil sector by 5.3%.”