Assets worth trillions to keep GCC resilient to global slowdown

The $43.7 trillion in liquid assets and quasi-liquid assets held by GCC countries and low debt levels are key factors set to drive economic transformation and diversification initiatives in the region, according to a global strategy consultancy firm.

Gulf economies will remain resilient to economic slowdown despite global and regional challenges since a combination of such a strong portfolio of liquid assets and low debt levels will ensure their sustainable growth, said a report by Oliver Wyman, the global consultancy firm.

"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," Pedro Oliver, Regional Head (MEA) region, Oliver Wyman, said.

The report, "Arabian Gulf Economies: Asset rich, transforming and full of opportunities," sheds light on factors that will further drive economic transformation and diversification in the region.

The current liquid assets and quasi-liquid assets that include $3.3 trillion in sovereign wealth funds and $40.4 trillion in proven oil and gas reserves will equate to $841 million in assets per capita of the GCC economies.

"Factors such as fluctuating oil prices, ongoing replacement of fossil fuels and slow transformation of some economies has induced a general sentiment of Gulf economies reporting a slowdown in economic activity. On the contrary, the combination of such a strong portfolio of liquid assets and low debt levels are the key factors in the sustainability of Gulf economies," said the report.

The report noted 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. "The modification of revenue channels and high value liquid assets are shaping into the main collaterals required to finance the formidable economic transformation and diversification initiatives led by the GCC regimes. Measures such as the introduction of VAT in the UAE, Saudi Arabia and now Bahrain have supported the diversification of these economies," said the report.

GCC's relatively young population is also seen as major future contributor in the transformation and diversification of economies. Around 30 per cent of the population are currently below the age of 21 and are expected to grow over the next decade. "Furthermore, there is a positive trend in the population's literacy rate as 32 per cent 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," said the report.

The report also highlights the 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 transformation of the private and public sectors driven by digitalisation and analytics.