A surge in oil prices and region’s crude production boosted the net foreign assets of Gulf hydrocarbon producers by a whopping $456 billion in 2011 to record their biggest asset increase since they began exporting oil.
After a steep fall in 2009 because of the 2008 global fiscal distress, the combined net foreign assets of the six-nation Gulf Cooperation Council (GCC) climbed from around $1,149 billion at the end of 2010 to an all time high of nearly $1,605 billion at the end of 2011, an increase of $456 billion.
The estimates by the Washington-based Institute for International Finance (IIF) showed the assets would further swell by nearly $300 billion to $1905 billion at the end of 2012 and rise again to a new record of $2,139 billion at the end of 2013 as oil prices are projected to remain high.
Most GCC states recorded sharp increases in their net foreign assets in 2011 with those of the UAE growing by around $59 billion to $521 billion from about $462 billion at the end of 2010, the report showed.
It expected the country’s foreign assets, mostly held by the Abu Dhabi Investment Authority (ADIA), to continue rising in the next two years to reach around $579 billion at the end of 2012 and $630 billion at the end of 2013.
Saudi Arabia’s assets, controlled by the Saudi Arabian Monetary Agency (SAMA), central bank, soared by around $106 billion from $445 billion to nearly $551 billion in the same period.
Assets controlled by Kuwait’s investment authority and other institutions stood at $396 billion at the end of 2011 and were projected to leap to $457 billion at the end of 2012. Qatar’s net foreign assets were put at $59 billion and are expected to surge to nearly $107 billion in the same period.
The report estimated the assets of Oman and Bahrain at $16 billion and $18 billion, which could respectively rise to $19 billion and $20 billion.
The report gave no figures on increase in the other GCC members but said Qatar’s Investment Authority now controls a record $200 billion while Kuwait’s assets have exceeded that level.
IIF said the surge in the GCC’s net foreign assets was a result of a sharp rise in oil prices and production, which swelled by around 1.5 million bpd to 16.5 million bpd. Most of the increase was by Saudi Arabia, which boosted supplies to offset oil export disruption in conflict-battered Libya.
It said high prices and output boosted the GCC’s combined nominal GDP by nearly 31 per cent to a record high of around $1.4 trillion last year.
“Buoyant hydrocarbon revenue contributed to large fiscal and external surpluses despite strong import growth and fiscal expansion….the GCC’s consolidated external current account surplus is expected to increase to a new peak of $358 billion in 2012, compared with an estimated $327 billion in 2011,” said IIF, which groups major banks in Western countries.
“The diversified nature of investments, and the projected large current account surpluses, should result in a further increase in the stock of net foreign assets to about $2.1 trillion by end- 2013, equivalent to 140 per cent of projected GDP….about 60 per cent of the foreign assets of the region are managed by sovereign wealth funds (SWFs) and invested in diversified portfolios of public equities, fixed income securities, real estate, and minority shares in big-name global companies.”
After topping an estimated $685 billion in 2011, the region’s hydrocarbon export receipts look set to rise to near $730 billion in 2012.
Similarly, on the fiscal side, government revenue from hydrocarbons is now estimated at $536 billion for 2011, rising to $567 billion in 2012.
“The continued increase in hydrocarbon receipts comes from both firmer oil prices and further increases in production volumes.”