Saudi Arabia’s construction sector contracted by 3.2 per cent during the first quarter of 2017 according to a report from local investment house Al-Rajhi Capital.

The year-on-year contraction follows declines in the previous three quarters. Construction activity in the kingdom has stalled as the government conducts a review of capital spending and considers plans for future projects.

The review has meant that little new work has been awarded and construction companies have been forced to cut back on their resources.

According to regional projects tracker MEED Projects there were $2.8bn of construction and infrastructure contract awards made in Saudi Arabia during the first quarter of this year. The figure improved significantly in the second quarter when there were $6.124bn of contract awards. The pick-up in awards suggests that the kingdom’s construction sector may be starting to recover after two years of dramatic decline.

The sharp downturn in the construction sector has impacted the broader economy. Al-Rajhi says that the construction sector accounts for 4.8 per cent of Saudi Arabia’s GDP. The largest sector is mining and quarrying, which accounts for 38.7 per cent of GDP.

Overall, Saudi Arabia’s GDP fell by 0.5 per cent during the first quarter of this year.