The total value of construction contracts awarded in Saudi Arabia hit SR27.9 billion ($7.4 billion) during the first quarter, down 51 per cent over SR57.3 billion ($15.2 billion) for the same period last year, said a report by NCB, the country’s leading bank.

The slow pace of activities witnessed toward the end of 2015 has continued further into the first quarter of 2016, with the contract value down 39 per cent over the previous quarter, stated NCB in its construction contracts index.

This represents a substantial drop and is indicative of increasingly tough economic conditions as the construction industry comes to terms with the severe impact of ongoing low oil prices. It is the sharpest quarterly decline in the value of awarded contracts since 2009, said the Saudi lender in its report.

While many of the projects awarded are likely to proceed, they may be scaled down or their execution  rescheduled over an extended period, it added.

However, the government will continue to spend on social and physical infrastructure projects, but the level of spending will inevitably be rationalised over the medium term, stated the
NCB report.

The report indicated that the main contributing sectors in Q1 were oil and gas, which has accounted for 47 per cent of the total value of awarded contracts worth SR13 billion ($3.46 billion), followed by hospitality at SR5.9 billion (21 per cent), and residential real estate SR4.6 billion (16 per cent).

According to NCB, the geographical analysis of contracts shows that the Eastern Province received the largest share with 51 per cent of the total value of awards.