Energy-rich Middle East states are set to reap up to $1.3tn in additional oil revenues over the next four years, according to the IMF, as they enjoy a windfall that will bolster the firepower of the region’s sovereign wealth funds at a time when global asset prices have sold off.
The IMF’s projections underscore how high energy prices driven by Russia’s war in Ukraine are buoying the Gulfs absolute monarchies while much of the rest of the world grapples with soaring inflation and fears of recession.
Jihad Azour, IMF director for the Middle East and north Africa, told the Financial Times that relative to expectations before the war in Ukraine, the region’s oil and gas exporters, particularly Gulf states, “will see additional cumulative oil revenues of $1.3tn through 2026″.
The Gulf is home to some of the world’s biggest oil and gas exporters, and several of its largest and most active SWFs. These include Saudi Arabia’s Public Investment Fund, the Qatar Investment Authority, Abu Dhabi’s stable of vehicles, including the Abu Dhabi Investment Authority, Mubadala and ADQ, and the Kuwait Investment Authority.
The $620bn PIF, which is chaired by Saudi Crown Prince Mohammed bin Salman, invested more than $7-5bn in US stocks in the second quarter, including in Amazon, PayPal and BlackRock, as it sought to take advantage of falling stock prices, according to market filings.
Gulf SWFs were similarly active during the pandemic as they looked to capitalize on the market volatility triggered by the Covid-19 crisis. During the global financial crisis in 2009, they took advantage of the turmoil to snap up stakes in distressed western companies.
In recent years, many of the funds have been focusing on sectors such as technology, healthcare, life sciences and clean energy as governments pursue returns on investments, but also seek to diversify economies and develop new industries.
Azour said it was important that the Gulf states used the latest windfall to
‘invest in the future”, including preparations for the global energy transition.
“It’s an important moment for them to . . . accelerate in sectors like technology [domestically] as this is something that will allow them to increase productivity,” he said. “In addition, their investment strategy could benefit from the fact that asset prices have improved for new investors, and the capacity to increase their market share in certain areas are also opportunities.”