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Value of Saudi contracts awarded in 2015 up 1.2%
Published in The Saudi Gazette on 13 - 03 - 2016

Despite the decline in the fourth quarter, the total value of awards contracts in Saudi Arabia reached SR223.4 billion in 2015, increasing by 1.2% compared to 2014, the "NCB Construction Contracts Index" for the fourth quarter of 2015 showed.
The main contributing sectors in 4Q'15 were oil & gas (SR28b), power (SR9b) and industrial (SR5b). The other sectors accounted for smaller shares of the value of awarded contracts these include commercial real estate (SR1 billion), hospitality (SR0.4 billion), residential real estate (SR0.3b) and education (SR0.2 billion).
The value of awarded contracts during the 4Q'2015 dropped by 25% in comparison to the third quarter of 2015, to score SR45.6 billion. 2015's value of awarded contract at SR223.4 billion undoubtedly bring a positive end to the year, but risk masking the challenges ahead, which are attributed to the lower government capital expenditure and slower economic growth.
Government spending for 2016 has been pegged at SR840 billion, down from SR975 billion actually spent in 2015.
Revenues for 2016 are forecasted at SR514 billion, down SR608 billion in 2015. However, it is important to acknowledge that over the last few years, the Kingdom has made huge investment in various sectors, including oil & gas, petro-chemical, power, transportation, and social and physical infrastructure. While contractors, though with varying degrees across the sectors are already engaged in many projects under different faces of implementation, the major headwinds on the construction industry are unlikely to arise into 2016. Meanwhile the cost cutting measures, which have been implemented in the 2016's budget, are essential to mitigate the impact of falling oil revenues, and also to enable the Kingdom to proceed with economic reform.
The Construction Contracts Index (CCI) ended the year at 260 points, making a slight increase by 10.80% over 2014's level of 234.48 points. The CCI exhibited volatile swings during 2015, but nonetheless settled relatively high at the end of the year. The CCI reached its highest level in October at 302 points. It dropped to 282 points in November and fell further to 260 points in December. Looking ahead, the supply of new projects that are entering the execution phase appear to be solid as indicated by the CCI's performance.
The Eastern Province captured the largest share of the value of awards contracts by contributing 61% during Q4'15. The majority of the Eastern Province's projects were attributed to contracts being awarded in the oil & gas sector. Numerous infrastructure-related contracts were awarded in Riyadh making 13% of total value of awarded contracts with particular emphasis on health, power and road sectors. The Northern region witnessed a large contract accounting for 8% share, being awarded within the power sector. In Makkah, a contract was awarded in the roads sector pertaining to the Umm Al Qura, King Abdul-Aziz Road Project.


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