GCC capital investment linked to global market volatility

Al-Monitor Pro Members

Dr. Karen E. Young 

Senior Research Scholar, Columbia University, Center on Global Energy Policy 

Sept. 15, 2022

The Gulf Arab states are a vital source of capital investment in their surrounding geography across the Middle East, North Africa and Pakistan. In this period of substantial state oil revenue generation, some traditional recipients of Gulf aid and investment will be in need as many are not oil or gas producers, and food and commodity inflation has had drastic impacts on their fiscal balances. We know that Gulf sovereign wealth funds have been actively buying up depressed assets in depreciating currencies in Turkey and Egypt, as well as increasing their holdings of US Treasuries and equities in the United States. What has not been evident is how the deluge of oil revenue in the first half of 2022 has affected capital investment flows from private and state-owned entities from the Gulf. The emerging evidence is that the windfall is accelerating capital flows from the UAE mainly from private firms and a few state-owned entities. Outward capital investment from Saudi Arabia and Qatar has been slower to flow. Domestic investment could be a priority. However, we are seeing significant intra-GCC investment, reversing a trend of financial disaggregation during the 2017-2021 period during the embargo of Qatar. Sovereign wealth fund placements from the Gulf seem to be headed strategically to Europe and the United States, according to new reporting by the SWF Institute.