A majority of the awarded contracts were in military, oil & gas, and petrochemicals which accounted for approximately 76% of the total value of contracts awarded. Water, power, and real estate contracts accounted for 18% of the total value while 6% were awarded in other sectors. The value of awarded contracts reached SAR45.2 billion ($12 billion) during Q1’20 as the momentum that was witnessed in 2019 continued into 2020. The value of awarded contracts increased by 28 percent compared to Q4’19 but decreased by 8 percent compared to Q1’19. While the pace of awarded contracts during Q1’20 exhibited the continued rebound in both the value and volume of awarded contracts that was witnessed in 2019, it was spared what is expected to be a downturn in the number of projects for the remainder of 2020 resulting from COVID-19 and the reduction in global oil prices. The government’s action to combat the effects of COVID-19 by announcing a 5 percent budget cut in March did not materially impact project awards during the first quarter but will affect the execution timeline of those contracts moving forward. The implementation of budgetary cuts in March as well as the more recent additional budget cut announced in May of SAR100 billion ($26 billion) are likely to dampen the Kingdom’s capital expenditures in 2020.
