How the Saudi reprioritisation is reshaping MENA

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GlobalData has reduced its forecast for construction growth in the MENA region in 2026 from 3.6% to 0.6% based on its first-quarter review. Although the region is still expected to produce $698.1bn this year, the quarterly adjustment shows that the business environment is more demanding and that protected funding, reliable sequencing and good contract terms are now more important than the overall project value.

The most compelling evidence is to be found in Saudi Arabia, where the country is still the region's biggest construction market, with a forecasted output of $157.4bn and a projected growth rate of 3.0% in 2026, even so GlobalData associates the deteriorating regional risk environment with the scaling back of major development projects, such as The Line.

Scale and restraint will be able to exist together. Although Saudi Arabia's development programme is still considerable, the evidence indicates that clients will have to establish a more definite order of priorities since geopolitical disruption and cost pressures are reducing the scope for manoeuvre.

A project may still have political significance even if its commercial prospects decline. Changes to the scope, further procurement or a longer construction period can affect the economic conditions for the contractors long before the project is officially postponed or cancelled.

Current published values are becoming a less reliable indicator of potential opportunities. Instead, one should look to design maturity, the completion of works, budget authority, the stage of procurement, and the way in which inflation is treated if one is to decide whether or not to commit personnel and balance-sheet resources.

The exposure is also present throughout the supply chain; if a specialist manufacturer decides to reserve its production for imported mechanical equipment, it can suffer a loss greater than its deferred revenue when an award is missed since factory time might be wasted and inventory could remain idle while other orders elsewhere may be lost.

Consultants and contractors must meet similar costs; if recruitment is carried out on the basis of an expected offer, accommodation is leased or plant is mobilised before the notice to proceed, then a delay in the client's decision can result in a direct loss of money.

GlobalData points out that higher costs for energy, transport and materials are responsible for the regional slowdown; long-duration fixed-price contracts become more difficult to carry out in such conditions, especially in cases where imported equipment makes up a large portion of the package and the client holds wide rights to change the scope or sequence.

Certain companies will continue to submit aggressive bids to gain a position in the kingdom. However, the boards are expected to investigate who is responsible for exceptional changes in cost, how rapidly the variations will be settled, and whether the client will be able to keep to the timetable should another budget review take place.

Saudi clients are likewise vying for the limited technical expertise. The investment in the grid, the construction of data centres, transport projects and industrial facilities makes use of the same engineers, electrical specialists, project managers and equipment suppliers that are required by projects in North America, Europe and Asia.

Because of the uncertainty, the cost of holding that capacity rises. Suppliers set prices for reservations, contractors become more careful about the gap between the time awards are made and the time they are given, and experienced staff tend to choose projects that offer continuity. It follows that a delay in the award can lead to a higher final cost, even if the scope does not change.

The most recent MENA construction outlook illustrates the extent to which the various markets have diverged. Growth for the UAE is expected to be 3.5% in 2026, with Morocco at 4.1% and Algeria at 4.2%, while Iran is anticipated to see a contraction of 18.4%. Iraq, Kuwait, Qatar and Israel are also expected to shrink.

The figures show that the companies are operating in very different environments. Although a company might run its operations in Riyadh, Abu Dhabi and Kuwait City from a single regional office, it would not make sense to apply the same assumptions to funding, import costs, payment risk and the continuity of programmes in each of these markets.

The fact that the UAE is showing relative resilience might lead to more bidders and more corporate resources becoming involved. This could assist clients in securing delivery capacity, but it might also cause prices to fall when contractors need larger margins to cover freight, fuel and equipment costs.

Proximity to the conflict means that a more stringent assessment is carried out; clients might keep transport, energy or housing schemes but could rephrase major programmes or delay optional components. Tenders can go on as the reviews progress, producing some activity even if there is little certainty regarding immediate site work.

The country's forecasts still require an analysis on a project-by-project basis. Who oversees the budget? How far has the design come? Has the land, the approvals and the enabling works been secured? Which party is responsible for the delays?

Maybe they are basic questions, but they can easily be overlooked in a market that has for a long time been linked with speed and scale; they distinguish genuine opportunity from costly anticipation.

The revision made by MENA occurs within a global construction recovery that is still very limited. GlobalData expects global output to grow by 0.8% in 2026 following a 0.3% decline in 2025; excluding China, growth would amount to 3.1%, demonstrating the extent to which the overall figure is reduced by the downturn in one major market.

The selection of the sector mix is just as careful; infrastructure is expected to increase by 3.8% and energy and utilities by 2.1%, while residential construction is due to shrink for the sixth time in seven years.

The main amount of momentum is found in public infrastructure, in investments in power and the grid, in semiconductor manufacturing and in AI-related data centres; these sectors generally enjoy greater policy support or have more clearly defined strategic sponsors than housing and commercial building, which are highly sensitive to rate changes.

The fact that concentration is taking place has an impact on the outlook for the construction sector in the MENA region. A contractor that has already received funding for grid work in one country has no reason to set aside its most skilled electrical team for a Gulf project that is still under review. Similarly, a supplier of equipment might prefer a smaller, bankable order to one that is larger and therefore more susceptible to redesign.

In areas where digital and energy investments overlap, the competition is particularly fierce. For example, since data centres need power connections, cooling systems and specialist mechanical and electrical contractors, and since grid programmes also require many of the same engineering and manufacturing skills, Gulf clients who want a quick delivery are bidding for capacity in the global market.

It is impossible for output forecasts to consider the quality of the competition. Even in a growing market weak margins can occur if freight prices remain volatile, if client decisions are late and if variations take months to resolve. Likewise, many projects can turn into a disadvantage when a great deal of them rely on the same scarce trades or on imported equipment.

GlobalData anticipates global construction growth reaching 2.8% in 2027 before averaging 3.7% per year from 2028 to 2030, this being due to investment in the energy transition, the development of digital infrastructure and the reorganisation of supply chains. Although the MENA region has both the means and the strategic interest in participating in this growth, its short-term performance will vary according to how swiftly clients convert their revised priorities into contracts that can be priced and delivered without involving open-ended risk.

The best opportunity to judge may come from Saudi Arabia. The projects that go ahead in the face of a more difficult cost and security situation will show which assets the country regards as urgent enough to worth allocating funds, management attention and limited delivery capacity. For the rest of 2026, the notices to proceed will indicate more about priorities than the extent of the programmes announced.

To access the full report, visit the GlobalData Construction Intelligence Centre.