About The Middle East
 

About The Middle East

With the discovery of oil, came massive financial expansion in the Middle East, particularly in the Gulf region, which is continuously experiencing a boom in infrastructure investments and a flourishing economy.

The Gulf Cooperation Council (GCC) economies not only represent themselves as exporters of oil and gas, but have also become a hub for investments, financial services, infrastructure and tourism. Governments with a new generation of leaders are helping their economies to thrive in different aspects as opposed to their traditional way via natural energy resources. Renewed and sophisticated knowledge systems as well as superior financial markets are the result of government efforts and endeavors.

The Emirates Center for Strategic Studies and Research (ECSSR) in Abu Dhabi conducts ongoing studies and research on the economic well-being of the United Arab Emirates and the Gulf region. It has reported on GCC oil prices and budgets that:

“Ever since oil prices began their bull run in 2003, GCC countries never recorded a budget deficit, because oil revenues constitute 80-90 percent of budgetary revenues. In contrast, budget deficits were a regular feature in Gulf economies almost throughout the 1990s. Thus, oil revenue supported fiscal spending holds immense importance for GCC countries, as whenever its member states get any indication of a prospective rise in oil prices they increase their spending.

On an average, oil prices stood at $100 per barrel throughout 2011 and this high price facilitated a hike in government spending in all GCC budgets by 19.3 percent, which amounted to $359.1 billion in GCC public spending in 2011, compared to $301.1 billion in 2010.

It is noteworthy that real surpluses in GCC budgets doubled in 2011 to reach $106.7 billion—compared to the surpluses recorded in the previous year that amounted to $55 billion. This was despite the increase in total spending of GCC countries by 19.3 percent.”

Since the governments of the GCC countries are running such a high budget surplus, the Middle East and North Africa (MENA) region is home to the largest number of Sovereign Wealth Funds (SWFs). 

Up to 20 SWFs in the MENA region make up roughly 30% of the total number of SWFs worldwide and 35% of their combined value.

Therefore, SWF institutions in the MENA region command around USD $1.75 trillion in funds, hence the strategic importance of this market. With these figures, one cannot deny the investor potential in this market.

 

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