Saudi Arabia’s hugely ambitious Neom megaproject is intended to kickstart a high-tech mega-region in the northwestern corner of the kingdom. Right now, it’s staring down a massive fiscal crisis. Originally envisioned as part of the Vision 2030 initiative led by Crown Prince Mohammed bin Salman, Neom is designed to diversify the Saudi economy away from oil dependency. While local officials remain optimistic, recent reporting suggests that investment in Neom has tanked and there are questions about that $500-billion startup’s future viability.
Neom stretches over an area roughly the size of Massachusetts. It intends to demonstrate radical new advances in urban planning that will revolutionize life and technology in the Kingdom of Saudi Arabia. The project will accommodate millions of new residents and produce a wealth of job opportunities in all different sectors and industries. The estimated final cost of megacity Neom is between $500 billion and $1.5 trillion. This ambitious figure is already under threat as the kingdom contends with ongoing budgetary pressures.
As of 2024, investments in Neom decreased by 12.4%, totaling 211 billion Saudi riyals (about $56.2 billion). This downward trend has led to a reduction in Neom’s share of the overall assets of Saudi Arabia’s Public Investment Fund (PIF). It fell from 8% growth to 6% on an annualized basis. Moreover, international investments in Neom’s portfolio have decreased from 20% to 17%, marking a decrease of interest among global investors.
Through 2024, the kingdom’s budget deficit had almost doubled. This dramatic increase stemmed from a plunging average oil price, which fell well below the production cost necessary to balance the national budget. Now crude prices have fallen again, and analysts are raising the alarm. They warn that this decline would limit potential revenue from Neom, putting the financial sustainability of the extravagant megaproject at risk.
The PIF is at the helm of multiple other gigaprojects, such as Neom. With the growing unpredictability of external funding, now it’s aiming its sights firmly at home investments. News reports indicate that several of Neom’s projects have been significantly reduced. Others have been entirely cast aside due to cost overruns and hard times in the world oil market.
Crown Prince Mohammed bin Salman first unveiled Neom as a flagship of Saudi Arabia’s Vision 2030 economic diversification plan. The goal of the initiative is to ignite a major economic shift through technological innovation and solutions for sustainable living. Now that the financial reality is upon us, concerns are growing about how realistic and implementable such ambitious plans are.