Middle East Capex Meets an Execution Wall

The Middle East’s capital projects and infrastructure market entered 2025 with strong investment momentum, but the sector’s central problem has shifted from announcing projects to actually delivering them. PwC Middle East says in its Capital Projects & Infrastructure Survey 2025, based on responses from more than 100 specialists surveyed in December 2024 and January 2025, that 75% expect capital and infrastructure spending to rise over the next two years, while Saudi Arabia, the UAE and Qatar remain the three leading investment markets.

Middle East capital investment remains strong

PwC finds that confidence remains high, but its foundation has changed. In 2014, optimism was more closely tied to oil revenues and large public budgets. In 2025, the sector depends more on private financing, regulatory clarity, digital maturity, delivery capability and alignment with national strategies including Saudi Vision 2030, Riyadh Expo 2030, the 2034 FIFA World Cup in Saudi Arabia and the Dubai 2040 Urban Master Plan.

The regional investment map is also becoming more selective. Saudi Arabia now leads as the top target market, cited by 78% of respondents, followed by the UAE at 65% and Qatar at 29%. At the same time, 73% say they plan to invest primarily through partnerships, joint ventures or alliances over the next two to three years, pointing to a more collaborative and risk-shared model of project funding.

Private capital is now central to project delivery

One of PwC’s clearest findings is the stronger role of private capital. Eighty percent of respondents say private sector funding is important to project delivery, while 73% expect partnerships, JVs and alliances to be their main investment route. That marks a structural shift away from a predominantly state-led model toward one that places more weight on budget discipline, delivery speed and risk allocation.

Yet that shift comes with a financing limit. PwC says 28% of respondents expect capital constraints to negatively affect their projects in the near term. The report adds that companies are already responding by delaying or scaling back lower-priority or higher-risk schemes and reallocating capital toward projects with stronger commercial logic or clearer national alignment.

Project success is now judged by financial returns

The report identifies a notable change in how project success is measured. Sixty-three percent of respondents now rank financial performance as the top success metric. That is a meaningful shift for a region where scale, political visibility and schedule compliance have historically carried unusual weight. In the new cycle, cost control, competitiveness and economic return are moving closer to the center of decision-making.

PwC also notes that many companies still describe delayed or over-budget projects as healthy if they ultimately deliver strategic, operational or commercial value. In other words, the market has not become intolerant of slippage. It has become more demanding about whether that slippage is justified by the outcome.

Cost overruns and delays remain deeply embedded

The most critical part of the survey concerns execution. PwC says 81% of respondents experienced cost overruns over the past year, while 79% reported delays. The share of projects running over budget rose from 71% in 2014 to 81% in 2025. On delays, the picture is more nuanced: projects delayed by one to six months increased from 45% to 66%, while delays of more than six months fell from 47% to 16%. That suggests the market has become somewhat better at containing prolonged failures, even if routine medium-term slippage remains widespread.

The causes of budget overruns are led by cost inflation and operating pressure. PwC says the most frequently cited factor is increased material, labour and equipment costs at 62%, followed by regulatory compliance at 44%, supplier shortages at 38%, owner-imposed variations at 35%, contractor and subcontractor performance at 30% and the complexity of modern projects at 30%.

The delay profile is similarly severe. Scope changes are the leading cause, cited by 56% of respondents. Contractor and subcontractor performance follows at 49%, with regulatory requirements and compliance at 38%, supplier performance at 38% and inadequate time allocation at 29%. PwC specifically links regulatory drag to planning and permitting approvals, health and safety standards, labour laws, procurement rules and audit obligations.

Regulatory complexity has become a primary investment risk

One of the survey’s sharpest messages is that regulation is no longer a secondary issue. Forty-five percent of respondents now see regulatory complexity as the main barrier to investment. Nearly half also connect it to cost overruns, while 38% link it to project delays. In earlier cycles, sector complaints were more likely to center on prices, labour or contract disputes than on regulation itself.

PwC’s broader point is that the market can no longer rely on scale and state backing alone. The new environment requires more agility, stronger compliance and more mature execution models. In that sense, regulatory complexity has moved from the background into the core investment risk stack.

Digital adoption is accelerating, but talent remains tight

PwC shows that digital transformation has moved well beyond the pilot stage. Sixty-five percent of respondents rank digital technology among their top three investment priorities for the next two to three years. Eighty-nine percent already use cloud technologies, 64% use BIM, 51% use AI/ML, and 33% plan to pilot generative AI within the next year. In addition, 54% already operate end-to-end digital workflows and another 32% expect to adopt them within a year.

PwC says the payoff from digital maturity is tangible. More mature organizations are achieving 15-20% project cost savings, 72% report efficiency gains, 66% say standardized digital processes reduce human error, and 61% say real-time dashboards improve decision-making. At the same time, the report warns that data silos remain common and that BIM, project controls, cloud services and IoT data are often still poorly integrated.

The more persistent constraint is talent rather than software. Forty-one percent of respondents cite a shortage of skilled resources as a major barrier to investment and growth. Even so, 71% say they are investing in developing and retaining internal talent, while 46% are trying to attract talent from the market. That suggests digital adoption is becoming standard, while qualified human capital remains scarce.

Managed services are moving into the mainstream

Managed services are another fast-rising theme in the survey. PwC says 49% of respondents already use them and another 25% plan adoption within a year. The report links that demand to shortages in project controls talent, rising complexity and compressed delivery timelines. It also says 48% believe managed services can improve the speed and quality of decision-making, while 39% see them as a route to technologies and innovations not readily available in-house.

That implies outsourcing and hybrid delivery models are no longer being treated as a temporary workaround. They are becoming part of the core operating architecture for large projects, especially where clients need fast support in controls, procurement, claims and technology-enabled execution.

War and regional conflict have changed the investment backdrop

War and persistent regional instability have also made the investment environment materially harder. While PwC’s survey focuses primarily on execution, regulatory complexity and capital discipline, the broader macro backdrop in 2025 became more fragile: the World Bank said the MENA outlook remained highly uncertain because of continuing armed conflicts and still-elevated tensions across several countries, while the IMF likewise noted that the region’s economic performance was holding up despite continued geopolitical tensions. In practice, that means war has put a large question mark over part of the long-term investment pipeline. Even where appetite for infrastructure, real estate and megaprojects remains strong, investors now have to price in higher risk premiums, vulnerability in logistics and energy markets, and greater uncertainty around supply chains, timing and project viability.

That backdrop is changing capital allocation itself. A few years ago, project scale alone could support the investment case. Now, war and geopolitical fragmentation are making investors more selective, pushing capital toward projects with clearer payback, stronger state backing, more resilient funding structures and shorter execution horizons. In that sense, the Middle East’s problem is no longer a lack of ambition. It is that war and instability have made the cost of getting execution wrong much higher even for the region’s wealthiest markets.

Georgia comparison: a different scale, but a similar scarcity logic

Although PwC’s survey is about capital projects and infrastructure in the Middle East, Georgia offers a useful contrast. According to Geostat, Georgia’s nominal GDP reached GEL 104.6 billion in 2025 and real growth was 7.5%. The number of international visitors reached 5.8 million, up 7% year on year, while tourist visits rose 8.4% to 5.5 million. An official Georgian National Tourism Administration overview says international travel revenues in the first nine months of 2025 reached a record $3.64 billion, up 5.1% from a year earlier.

Georgia also maintains a relatively workable safety profile outside its occupied territories. The UK government advises against travel to Abkhazia and South Ossetia and adjacent boundary areas, but does not apply that warning to the whole country. For real estate and hospitality investors, that distinction matters because baseline perceptions of safety remain central to second-home demand and cross-border capital flows.

The supply problem sits at the upper end of the market. Forbes Georgia has described the country’s premium and luxury hospitality segment as growing but still limited in scale. That makes Georgia an instructive contrast to the Gulf. In the GCC, the main constraint is executing very large and complex projects efficiently. In Georgia, the constraint is the relatively thin stock of high-quality luxury product despite strong tourism and macro momentum.

As International Investment experts note, the Middle East in 2025 is already in a phase where the market penalizes weak execution more than a lack of ambition. Georgia, by contrast, remains a market where demand, tourism growth, GDP expansion and a relatively workable safety profile are running ahead of the depth of quality luxury supply. Taken together, the two stories matter because one shows the limits of scale without execution, while the other shows the opportunity created when demand forms faster than premium product.

FAQ

What is the core takeaway from PwC’s 2025 survey?
The main takeaway is that the Middle East’s capital projects market remains highly optimistic, but execution risk is becoming the defining issue. PwC says 75% expect spending growth, yet 81% have experienced cost overruns and 79% delays.

Which countries lead the regional investment map?
PwC identifies Saudi Arabia, the UAE and Qatar as the top three markets for capital projects and infrastructure investment. Within the survey, Saudi Arabia was cited by 78% of respondents, the UAE by 65% and Qatar by 29%.

Why has private financing become so important?
Because 80% of respondents say private sector funding matters to project delivery, while 73% plan to use partnerships, JVs or alliances as their main investment model. That reflects a move toward a more blended funding environment.

What is the leading cause of cost overruns?
PwC says increased material, labour and equipment costs are the most common cause, cited by 62% of respondents, followed by regulatory compliance and supplier shortages.

What is the leading cause of delays?
Scope changes rank first, cited by 56% of respondents. Contractor performance, regulatory requirements and supplier issues are also major contributors.