The Middle East construction sector faces a notable slowdown in 2025, with contract awards in the Gulf Cooperation Council dropping 39 percent in the first five months compared to last year. This dip stems from tighter spending in Saudi Arabia’s massive gigaprojects and regional economic shifts, yet experts point to ongoing opportunities in key areas like infrastructure and real estate across the region.
Sharp Decline in GCC Contract Awards
Contract awards in the GCC totaled 67 billion dollars from January to May 2025, down from 110 billion dollars in the same period of 2024. Saudi Arabia leads this decline, with a 72 percent plunge in construction contracts during the second quarter alone.
This trend reflects broader efforts to control budgets amid falling oil prices and rising project costs. Analysts note that while awards have slowed, the overall project pipeline remains strong at over 3 trillion dollars across the Middle East and North Africa.
Many projects now focus on phased rollouts rather than rapid expansion. This approach helps manage finances but keeps construction crews busy on essential developments.
Saudi Gigaprojects Face Reality Check
Saudi Arabia’s ambitious gigaprojects, launched in 2017 to diversify the economy beyond oil, have seen major adjustments. Programs like Neom, a futuristic city project, now consume about 20 percent of global steel supplies, yet face delays and scaled-back plans.
Recent reports show an 8 billion dollar cut in domestic megaproject values due to cost overruns and slipping timelines. For instance, The Line, a planned 110 mile long linear city, has been shortened from its original vision amid worker layoffs and budget reviews.
Despite these setbacks, core sectors like energy and utilities continue to grow. Officials emphasize that these changes represent smart adjustments, not abandonment of Vision 2030 goals.
Key impacts include:
- Reduced contract values by up to 75 percent in some quarters.
- Shift toward selective investments in sustainable transport and public infrastructure.
- Continued awards from clients like Diriyah Company for cultural and tourism sites.
UAE Leads Regional Project Spending
While Saudi Arabia slows, the United Arab Emirates steps up as the GCC leader in construction activity. The UAE has nearly matched its 2024 contract awards, driven by strong investments in aviation, real estate, and public private partnerships.
Dubai and Abu Dhabi push forward with projects like airport expansions and smart city initiatives. This momentum helps offset regional declines and attracts international contractors seeking stable opportunities.
Experts forecast the UAE’s construction sector to grow by 9 percent in 2025, fueled by economic diversification and tourism booms. Compared to neighbors, the UAE benefits from more flexible spending policies.
| Country | Contract Awards (Jan-May 2025, in billions) | Change from 2024 |
|---|---|---|
| Saudi Arabia | 25 | -72% |
| UAE | 30 | -5% |
| Other GCC | 12 | -20% |
| Total GCC | 67 | -39% |
Broader Opportunities in Middle East Construction
Even with the slowdown, the Middle East offers large scale construction chances in 2025. The region’s project pipeline, valued at 3.7 trillion dollars, focuses on transportation, buildings, and social infrastructure to support growing populations.
Countries like Qatar and Oman maintain steady awards in sports venues and energy projects. Public private partnerships emerge as a key model to fund developments without straining national budgets.
Investors eye aviation hubs and real estate in the UAE, while Saudi Arabia prioritizes core infrastructure over expansive visions. This balanced approach ensures long term growth despite short term cuts.
Future Outlook and Challenges
Looking ahead, the construction sector in the GCC could rebound if oil prices stabilize and global investments flow in. Forecasts suggest a promising outlook through 2028, with annual spending potentially reaching 175 billion dollars on industrial and mega projects.
Challenges remain, including geopolitical tensions and supply chain issues. However, diversification efforts continue to drive demand for skilled workers and innovative building techniques.
Stakeholders recommend focusing on sustainable practices to attract funding. As the region adapts, opportunities for contractors and consultants persist in high demand areas.
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