$43.7trn assets set to sustain Gulf economies through challenges

The combination of a strong portfolio of liquid assets and low debt levels are key factors that are expected to sustain Gulf economies despite challenges such as fluctuating oil prices, according to new research.

A new report by Oliver Wyman, the global consultancy firm, said Gulf economies currently boast $43.7 trillion in liquid assets and quasi-liquid assets - $3.3 trillion in sovereign wealth funds and $40.4 trillion in proven oil and gas reserves - equating to $841 million in assets per capita.

The report highlighted key areas of growth opportunities in the region over the next five years, such as overall restructuring of the public sector, diversification into renewables and petrochemicals, the fintech boom, revamping and modernization of the transportation and construction sectors, tourism and the transformation of the private and public sectors driven by digitalization and analytics.

“Undoubtedly, the oil and gas reserves of the Gulf countries have enabled one of the biggest economic booms in human history, but this has also materialized because these countries had, and still have, the willingness to advance and improve themselves. There are several countries that have even bigger oil & gas reserves, and abundant water and farmland and yet struggle to feed their populations,” said Pedro Oliver, regional head (MEA), Oliver Wyman.

“Looking towards the future, GCC economies must take the advantage of the valuable lead time that they have to transform into post-oil economies, because fossil-fuel substitution will not happen as fast as many people believe it will,” he added.

The report said that one of the significant actions taken by the Gulf countries is the introduction of regional transformational programs to wean away from fossil fuel dependency. 

It added that measures such as the VAT initiatives in the UAE, Saudi Arabia and now Bahrain have supported the diversification of these economies.

Other factors such as the GCC’s relatively young population, are also seen as major future contributors to the workforce of the future, by attaining the necessary skill set required to work in the sectors leading the transformation and diversification of economies.

The report said 30 percent are currently below the age of 21 and this is expected to grow over the next decade. Furthermore, there is a positive trend in the population’s literacy rate as 32 percent of the young population is expected to have acquired the necessary skills to work in the tertiary sector.

"The population growth will also increase internal consumption and therefore support GDP growth," the report noted.