A steep rise in oil revenue is set to drive up the aggregate external assets of oil-rich Gulf states to as much as $6 trillion if crude prices remain buoyant, according to Goldman Sachs estimates.
The upside scenario of $6 trillion could be reached if oil prices average $120 a barrel until the end of 2026, the US investment bank said in its Mena 2023 Outlook report this week.
“In our base case, which sees Brent crude averaging $83 per barrel over the next five years, we estimate that GCC external assets could reach $5.5 trillion by end-2026, an increase of $1.3 trillion over the next four years,” said Farouk Soussa, Mena economist at Goldman Sachs.
In a downside scenario, where oil prices decline to $40 per barrel, “GCC assets could plateau at just under $5 trillion”.
“Our projections are highly dependent on the assumed trajectory of oil prices,” Mr Soussa said.
The price of Brent, the global benchmark for two thirds of the world’s oil, rose to a notch under $140 a barrel in March after Russia’s military assault on Ukraine, but gave up most gains in recent months.
Oil prices have dropped to near $80 a barrel from their June peak of about $129 a barrel amid weakening economic outlook and demand concerns.
Brent was trading down 0.2 per cent at $80.52 at 7.49am UAE time on Wednesday. West Texas Intermediate, the gauge that tracks US crude, was 0.16 per cent lower at $75.27 a barrel.
Even with recent softness, oil prices remain well in excess of the GCC's fiscal and breakeven levels of about $65 and $50 a barrel, respectively, according to Goldman Sachs' estimates.
“Should oil prices rise in line with our relatively bullish medium-term forecasts, hydrocarbon revenues for GCC oil would rise to levels close to the historic high achieved in 2012,” Mr Soussa said.
“Combined with historically low fiscal and external break-evens, this implies significant fiscal and external surpluses over the coming five years.”
Economies in the GCC bounced back strongly after the coronavirus-driven slowdown last year and the growth momentum has picked up further pace this year, driven by higher oil revenue.
Swift action to mitigate the effects of the pandemic have also boosted GCC economies, which are set to double their growth this year despite geopolitical and macroeconomic headwinds, according to an International Monetary Fund staff report earlier this month.
The fund expects the oil-rich economies of the GCC to grow by 6.5 per cent this year, up from 3.1 per cent in 2021. The growth — led by Saudi Arabia and the UAE, the two biggest Arab economies — is expected to moderate to 3.6 per cent next year.
The World Bank has forecast that Gulf economies will grow 6.9 per cent this year before decelerating to 3.7 per cent and 2.4 per cent in 2023 and 2024, respectively.
The total economic output of the countries in the six-member bloc is expected to hit $2 trillion in 2022, the IMF said in its Gulf Economic Outlook in October.
If the Gulf countries continue business as usual, the region’s combined GDP will grow to $6 trillion by 2050, the World Bank report said.
That figure could shoot up to more than $13 trillion by 2050 if they adopt a strategy of green growth that speeds up economic diversification.
Goldman Sachs remains bullish on the oil sector and economic prospects of the GCC for the medium to long term.
It said the recent softness in oil markets should be viewed in perspective as oil prices are still high relative to their average over the past several years.
“They would need to remain significantly lower for longer before we turned bearish on [a] GCC macro [economic scenario],” the report said.
Goldman Sachs expects the oil windfall will lead to a significant pick-up in domestic investment, driving stronger economic growth.
“This is particularly true in Saudi Arabia, where the list of mega-projects currently under way implies over $700 billion in domestic investment between now and the end of the decade,” Mr Soussa said.
The strength of economic fundamentals is also supportive for GCC risk assets in the medium term, according to the bank.
“Twin surpluses are driving outperformance of regional credit, according to our EM [emerging markets] credit strategists, who highlight the attractiveness of high-yield oil producers [Oman and Bahrain] in particular,” Mr Soussa said.
“Our equity research colleagues are also bullish on regional equity markets, which are seeing a rapid expansion thanks to new listings, as well as higher valuations.”
MATCH INFO
Euro 2020 qualifier
Norway v Spain, Saturday, 10.45pm, UAE
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
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Leaderboard
63 - Mike Lorenzo-Vera (FRA)
64 - Rory McIlroy (NIR)
66 - Jon Rahm (ESP)
67 - Tom Lewis (ENG), Tommy Fleetwood (ENG)
68 - Rafael Cabrera-Bello (ESP), Marcus Kinhult (SWE)
69 - Justin Rose (ENG), Thomas Detry (BEL), Francesco Molinari (ITA), Danny Willett (ENG), Li Haotong (CHN), Matthias Schwab (AUT)
Also on December 7 to 9, the third edition of the Gulf Car Festival (www.gulfcarfestival.com) will take over Dubai Festival City Mall, a new venue for the event. Last year's festival brought together about 900 cars worth more than Dh300 million from across the Emirates and wider Gulf region – and that first figure is set to swell by several hundred this time around, with between 1,000 and 1,200 cars expected. The first day is themed around American muscle; the second centres on supercars, exotics, European cars and classics; and the final day will major in JDM (Japanese domestic market) cars, tuned vehicles and trucks. Individuals and car clubs can register their vehicles, although the festival isn’t all static displays, with stunt drifting, a rev battle, car pulls and a burnout competition.
If you go
The flights
Emirates and Etihad fly direct to Nairobi, with fares starting from Dh1,695. The resort can be reached from Nairobi via a 35-minute flight from Wilson Airport or Jomo Kenyatta International Airport, or by road, which takes at least three hours.
The rooms
Rooms at Fairmont Mount Kenya range from Dh1,870 per night for a deluxe room to Dh11,000 per night for the William Holden Cottage.
How being social media savvy can improve your well being
Next time when procastinating online remember that you can save thousands on paying for a personal trainer and a gym membership simply by watching YouTube videos and keeping up with the latest health tips and trends.
As social media apps are becoming more and more consumed by health experts and nutritionists who are using it to awareness and encourage patients to engage in physical activity.
Elizabeth Watson, a personal trainer from Stay Fit gym in Abu Dhabi suggests that “individuals can use social media as a means of keeping fit, there are a lot of great exercises you can do and train from experts at home just by watching videos on YouTube”.
Norlyn Torrena, a clinical nutritionist from Burjeel Hospital advises her clients to be more technologically active “most of my clients are so engaged with their phones that I advise them to download applications that offer health related services”.
Torrena said that “most people believe that dieting and keeping fit is boring”.
However, by using social media apps keeping fit means that people are “modern and are kept up to date with the latest heath tips and trends”.
“It can be a guide to a healthy lifestyle and exercise if used in the correct way, so I really encourage my clients to download health applications” said Mrs Torrena.
People can also connect with each other and exchange “tips and notes, it’s extremely healthy and fun”.
THE SPECS
Engine: six-litre W12 twin-turbo
Transmission: eight-speed dual clutch auto
Power: 626bhp
Torque: 900Nm
Price: Dh940,160 (plus VAT)
On sale: Q1 2020
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RESULTS
6.30pm UAE 1000 Guineas Trial Conditions (TB) US$100,000 (Dirt) 1,400m
Winner Final Song, Christophe Soumillon (jockey), Saeed bin Suroor (trainer).
7.05pm Handicap (TB) $135,000 (Turf) 1,000m
Winner Almanaara, Dane O’Neill, Doug Watson.
7.40pm Handicap (TB) $175,000 (D) 1,900m
Winner Grand Argentier, Brett Doyle, Doug Watson.
8.15pm Meydan Challenge Listed Handicap (TB) $175,000 (T) 1,400m
Winner Major Partnership, Patrick Cosgrave, Saeed bin Suroor.
8.50pm Dubai Stakes Group 3 (TB) $200,000 (D) 1,200m
Winner Gladiator King, Mickael Barzalona, Satish Seemar.
9.25pm Dubai Racing Club Classic Listed Handicap (TB) $175,000 (T) 2,410m
Winner Universal Order, Richard Mullen, David Simcock.
Test series fixtures
(All matches start at 2pm UAE)
1st Test Lord's, London from Thursday to Monday
2nd Test Nottingham from July 14-18
3rd Test The Oval, London from July 27-31
4th Test Manchester from August 4-8
Genesis G80 2020 5.0-litre Royal Specs
Engine: 5-litre V8
Gearbox: eight-speed automatic
Power: 420hp
Torque: 505Nm
Fuel economy, combined: 12.4L/100km
Price: Dh260,500
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
UAE currency: the story behind the money in your pockets
Five hymns the crowds can join in
Papal Mass will begin at 10.30am at the Zayed Sports City Stadium on Tuesday
Some 17 hymns will be sung by a 120-strong UAE choir
Five hymns will be rehearsed with crowds on Tuesday morning before the Pope arrives at stadium
‘Christ be our Light’ as the entrance song
‘All that I am’ for the offertory or during the symbolic offering of gifts at the altar
‘Make me a Channel of your Peace’ and ‘Soul of my Saviour’ for the communion
‘Tell out my Soul’ as the final hymn after the blessings from the Pope
The choir will also sing the hymn ‘Legions of Heaven’ in Arabic as ‘Assakiroo Sama’
There are 15 Arabic speakers from Syria, Lebanon and Jordan in the choir that comprises residents from the Philippines, India, France, Italy, America, Netherlands, Armenia and Indonesia
The choir will be accompanied by a brass ensemble and an organ
They will practice for the first time at the stadium on the eve of the public mass on Monday evening
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
More on Quran memorisation:
