GCC wealth funds set to expand global presence on growing liquidity buffers
Continued foreign currency generation will allow GCC-based sovereign wealth funds (SWFs) to extend their foray into global markets in the coming few years, S&P Global Market Intelligence said in a report.
“We are also likely to see a recycling of GCC petrodollar inflows into MENA countries and other emerging markets that present interesting investment opportunities and need external funding or are vulnerable to current geopolitical, economic, and monetary shocks,” the report said, citing Egypt and Turkey as examples.
The GCC governments benefited from enhanced liquidity buffers during the better part of 2022, thanks to the surge in energy-derived revenues following Russia’s invasion of Ukraine and international sanctions on Russia.
The GCC current account surplus is also forecast at 9% of GDP in 2023 and 6% of GDP in 2024. This means that funds will continue flowing into deep-pocketed SWFs, providing additional investment opportunities domestically and abroad.
The regional SWFs are currently striving to expand their global footprint by investing in various geographies and sectors, mainly in India, China and other Asian countries, driven by the deepening of economic, trade, and diplomatic ties.
According to Global SWF, regional SWFs’ assets under management (AUMs) have grown by 20% on average in the past couple of years, reaching around $4 trillion.
Five of the world’s 10 largest investments on behalf of state-owned investors in 2022 were from GCC sovereign investors (62% from the UAE, 28% from Saudi Arabia, and 10% from Qatar).
“GCC SWFs appear to have become go-to investors in difficult times,” S&P said, adding GCC state-owned investors, including SWFs and public pension funds, deployed around $83 billion of fresh capital last year.
