Saudi Arabia: what opportunities for our Companies in the construction sector?

Fashion, food and furniture, traditionally the pillars of Made in Italy, represent only part of the main sectors of the Italian exports to Saudi Arabia. The prospects for Italian companies in this market are particularly promising, especially in the most dynamic sectors such as wood and furniture, transportation equipment, electrical equipment and construction.

This positive scenario is reinforced by a strategic partnership with Saudi Arabia, which extends cooperation to key sectors such as renewable energy, digital and space. In addition, Italian companies can benefit from the investment opportunities offered by the Saudi Vision 2030, an ambitious reform program aimed at transforming the Saudi economy by reducing dependence on hydrocarbons and fostering growth based on services and knowledge.

Saudi Arabia: exports growing steadily

Over the period 2024-2027, Saudi imports are expected to grow at an estimated annual rate of around 5%. Relations between Italy and Saudi Arabia in particular, are currently in a particularly favorable context, with Italian exports steadily increasing. The nation represents the third largest destination market for Italian goods in the Middle East and North Africa region, ranking 32nd globally.

Focus on the construction sector in Saudi Arabia

Looking at the outlook for the construction sector, increasing infrastructure and urban investment, in line with the Vision 2030 mega-projects, coupled with steady population growth (estimated at 2% annually and with a population exceeding 36 million), indicates promising growth for exports in the construction and design sectors.

Indeed, the business environment in Saudi Arabia is extremely dynamic characterized by reforms that simplify business activities and attract foreign investment. The country also offers significant tax advantages, including no personal income tax, a 20% rate on business income and a VAT set at 15%. In addition, numerous agreements to avoid double taxation are in place, including those with Italy. Additional incentives include facilities for importing materials and equipment for new productive investments, facilitation in obtaining visas, and support for joint ventures and business location.

In light of these factors, the construction sector emerges as a strategic area with excellent development prospects and significant opportunities for Italian companies.

Business prospects in the wake of Vision 2030

Saudi Arabia represents a large market, with a predominantly young population of nearly 36 million and an annual population growth rate of between 2% and 3%. These factors suggest a steady increase in population over the next decade, opening up significant business opportunities for Italian companies.

Indeed, rapid population growth is generating growing demand for housing, infrastructure and services, which is the country's main growth driver. The Saudi government's massive planned investments are aimed precisely at supporting a demand that is set to reach unprecedented levels.

Already among the key sectors for Italian exports, the construction sector in Saudi Arabia emerges precisely at the forefront, thanks to the numerous projects promoted under Vision 2030. According to MAECI's Economic Observatory, the main opportunities are related to the urban and real estate development, with a construction market that has seen steady growth in recent years. In fact, the country is the largest producer and consumer of building materials in the entire Middle East region.

In fact, a recent report by real estate consulting firm Knight Frank predicts that the nation will become the main construction market globally by 2028. The study highlights tremendous growth in Saudi Arabia's construction sector, with industrial output reaching $141 billion in the first half of this year, registering a 43% increase over 2023. This is projected to exceed $181 billion by the end of 2028.

GlobalData estimates average annual growth. higher than 4% for this market in the period 2024-2027, and the opportunities cover many sectors, including: building materials (with a particular focus on ceramics), lighting and machinery. water treatment, and electrical systems. Many Italian companies have already seized the opportunities presented by the development of futuristic cities, such as Neom, and the awarding of the 2029 Winter Olympic Games opens up further prospects in sectors related to the construction of facilities and infrastructure dedicated to the event.

Octagona, with over ten years of experience in business internationalization, is able to offer comprehensive assistance to companies interested in entering this market. We develop tailor-made projects, following specific customer requirements.

Contact us for more information.