Why 2026 Marks a Turning Point for Middle East Construction

From the outside, it looks like the Gulf construction market is slowing down due to concerns about Saudi Arabia's big projects, tighter public spending, and geopolitical tensions. However, 2026 is expected to be a big year. Governments and developers are going to start investing more selectively, digitalization will increase, and there will be better risk controls.

Saudi Arabia is the best example of this change. Its non-oil economy keeps growing, inflation remains under control, and unemployment is at record lows. This shows that the Vision 2030 reforms are working. At the same time, the government expects wider budget deficits in 2025 and 2026. Ratings agencies warn that lower oil prices, combined with high spending demands, could strain the country’s budget plans.

Project activity reflects this change. According to MEED Projects, the number of contracts given to GCC companies fell by 39 percent in the first five months of 2025. This decline was mainly because Saudi investments were put on hold for a while. However, the funding is being changed, not canceled. The latest figures from the Public Investment Fund show that assets under management have increased by about 19 percent compared to last year, with $56.8 billion invested into important sectors in 2024. This shows that people are still committed to the long term, even if there are some changes in the short term.

According to Marsh's Construction Market Update 2025, Saudi Arabia's construction sector is expected to grow at an average annual rate of 5.4 percent through 2029. This growth is driven by major transport, energy, industrial, and housing projects, including preparations for Expo 2030 Riyadh and the 2034 FIFA World Cup. The outlook for the UAE is also strong, supported by ongoing investment in logistics, energy, and large commercial real estate developments.

Global forecasts are all pointing in the same direction. They say that the Middle East is one of the world's fastest-growing construction regions. This is because there are a lot of long-term projects for energy, power, water, and transportation.

The biggest change is in how the sector handles risk. Mercer's Economic and Market Outlook 2026 expects steady global growth, helped in part by investments in AI that could reach $500 billion a year. With inflation stabilizing, contractors can more confidently plan for material costs and financing more confidently. This is an essential factor for long, capital-intensive projects.

Companies are already making changes. Contractors are being more selective about the jobs they take, making more strict contract terms, and checking subcontractors and supply chains more closely. For nearly one-third of the world's contractors, inflation and economic uncertainty are now their biggest business risks. These concerns are more important than issues like rising material costs, labor shortages, and shipping problems.

Making supply chains stronger is now a top priority. Across the Gulf, project owners are doing three things. They're getting materials from more places. They're making more things in the local countries. And they're using more long-term deals for important materials. These steps reduce the impact of geopolitical challenges, improve delivery timelines, and create greater cost certainty, which directly supports more reliable project execution.

AI is becoming a powerful tool for project delivery. It now supports not only asset design but also logistics planning and scheduling, while giving boards, investors, and insurers clearer insight into supply-chain risks.

The insurance market is also doing well. More insurers are willing to take on construction risk, which has led to lower rates in many regions and has kept pricing and capacity stable. In the MENA region, large national development programs continue to attract strong insurer interest. This makes accurate project data and solid plans to reduce risk increasingly important for getting the best insurance deals.

Recent data shows how adaptable the sector has become. GlobalData's Construction Project Momentum Index reached 1.01 in the MENA region in June 2025. This is the highest score worldwide. However, it declined to 0.77 in July as Saudi Arabia adjusted the pace of its projects. During the same period, the UAE's score increased from 0.91 to 1.13, showing that activity is shifting within the region rather than slowing down overall.

All these trends together show that we're moving from a period of fast growth to a more stable, stronger growth phase. As inflation around the world slows down and technology improves, supply chains become stronger, and insurance is more reliable. This sets the stage for 2026 to become a breakthrough year. The region is using technology, careful planning, and smart investments to create a lasting competitive advantage. This approach helps create projects that are smarter and better prepared for the future.