Digital rendering of Neom’s line project in Saudi Arabia
Line, Neom
Saudi Arabia’s Mammoth Sovereign Wealth Fund saw a significant drop in investments in so-called Gigaprojects, which amounted to the $8 billion write world at the end of 2024, despite its managed assets reaching nearly $1 trillion, according to its annual report.
Gigaproject Investments fell 12.4% to Saudis ($56.2 billion). Meanwhile, assets overseen by PIF have risen 19% to about $913 billion since the end of 2023, becoming one of the largest and fastest growing sovereign wealth funds on the planet. Gigaprojects, which includes a $500 billion future Neom development, accounted for 6% of PIF’s assets in 2024, down from 8% the previous year.
The writing comes amid a decline in global crude oil prices and an increase in the Kingdom of Saudi Arabia’s budget deficit.
Annual PIF returns since 2017 fell to 7.2% from 8.7% in the previous year. Funds – Various blue chip companies have important holdings Uber and Teslaand owns major sports franchises such as Liv Golf and British Soccer Club Newcastle United. It also expanded its funding base, raising nearly $10 billion in public debt and $7 billion personally.
International investments fell to 17% of the portfolio as the fund focused on domestic investments.
Part of the reason behind the PIF’s important jump at AUM is due to the fact that Saudi oil giant Aramco is allocated to the fund. However, analysts point out that if gross prices continue to fall, as some industry forecasts expect, the percentage of revenue that the Saudi government and PIF can derive from these oil investments is likely to decline due to the traction.
It is expected that PIF’s investment funds will be limited due to lower crude oil prices and lower forecasts for oil demand. In the meantime, analysts say they are expected to increase investment in high-growth areas such as artificial intelligence.
Overrun of budget
Neom, a new region in western Saudi Arabia, is built from the ground up on the near-scale Massachusetts and is part of Vision 2030, with the aim of moving the Saudi economy away from oil revenues and creating new jobs and industries for the burgeoning young population.
Neom, the creator of Saudi Arabia’s Crown Prince Mohammed bin Salman, will include many futuristic cities and developments the kingdom expects. However, budget overruns, operational complications and the situation in the global oil market have forced the kingdom to scale back or completely shelved some of those projects, a source working on Neom told CNBC.
Neom’s costs are estimated to range from $500 billion to $1.5 trillion. After years of unlimited spending, 2024 began to make sudden changes as Saudi Arabia’s budget deficit rose and the prices of barrels of oil fell far below what was needed to balance the kingdom.
