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Saudi Arabia has drawn attention for the dystopian architectural projects it launched to diversify its economy and become a luxury tourist destination.
However, the entire project is stalling after economic fluctuations slashed returns for the Saudi sovereign wealth fund. The reason is low oil prices, with estimates that they’ll remain low for some time.
Falling oil prices. One goal of Saudi Arabia’s Vision 2030 project was to reduce the heavy dependence of the country on oil and gas fields, the source of its current prosperity. But the current geopolitical context and the steady rise of sustainable energy have driven oil prices down sharply in recent months.
According to the Financial Times, in March 2025, the price per barrel on international markets hovered around $70, far below the more than $100 reached in 2022. Despite production cuts by the Organization of the Petroleum Exporting Countries (OPEC+), oil prices have recovered slowly and insufficiently.
Without oil, no financing. This revenue decline directly affects the country’s budget, which officials estimate will shrink more than 3.7% annually until 2025. Saudi authorities had projected much higher revenues to fund their ambitious plans, creating a significant deficit in public accounts and jeopardizing financing for flagship megaprojects.
“A sharper and sustained fall in the oil price would require a deeper retrenchment in government spending to contain the size of the shortfall and the building in government debt,” Monica Malik, chief economist at Abu Dhabi Commercial Bank, told the Financial Times.
As Bloomberg reported, the Saudi government budgeted $342 billion in spending through 2025, expecting about $315 billion in oil revenues. That would leave a $27 billion deficit, worsened by oil revenues that remain low.
A first cut already made. This isn’t the first time Neom’s massive architectural projects have faced cuts. A year ago, plans for a 170-mile-long building shrank to just 1.67 miles by 2030. Officials also canceled construction of a desalination plant meant to supply water for the new city.
According to The Wall Street Journal, unlike the current situation, those cuts stemmed from poor financial performance by the Saudi Public Investment Fund, along with “creative accounting” by project managers to justify cost overruns.
The Saudi crossroads. With several half-built projects and a rush to attract investment to cover rising costs, Saudi Arabia has committed to hosting the 2029 Asian Winter Games, followed by Expo 2030 in Riyadh and the World Cup in 2034.
These commitments will force the government to further reduce investments in major tourism projects to focus on building 10 futuristic stadiums, a ski resort with an artificial freshwater lake and snow—all in a desert climate.
Image | NEOM
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