Middle Eastern states are to land a $1.3 trillion windfall from extra oil revenues over the next four years, according to the International Monetary Fund (IMF).
On Friday, the IMF predicted oil and gas exporters, notably the Gulf states, to benefit from high prices and opportunities to ramp up their market share.
The oil and gas sector is in flux following the Russia-Ukraine conflict, which has upended markets and sent prices soaring. Whilst Russia may have increased exports of oil to Asian nations, European gas supplies have seen a notable dip, prompting countries to seek out new supply sources.
Jihad Azour, the IMF’s director for the Middle East and North Africa, said that countries in the Middle East could expect to receive $1.3 trillion more in cumulative revenues than was forecast before the Russia-Ukraine conflict.
Azour said that Gulf states needed to use the windfall to “invest in the future”, including efforts to switch towards greener energy sources.
He added, “It’s an important moment for them to…accelerate in sectors like technology [domestically] as this is something that will allow them to increase productivity.
“In addition, their investment strategy could benefit from the fact that asset prices have improved for new investors, and the capacity to increase their market share in certain areas are also opportunities.”
The windfall is expected to benefit some of the world’s biggest sovereign wealth funds including the Qatar Investment Authority, Saudi Arabia’s Public Investment Fund (PIF), the Kuwait Investment Authority and Abu Dhabi’s Mubadala and ADQ.
Gulf states are expected to spend the proceeds of the oil boom on building huge infrastructure projects, as well as investing overseas.
Azour said, “What is going to be really important is how they [Gulf states] manage this new cycle and how they maintain, at the same time, the benefits of the additional liquidity and the policies that will not lead them into procyclicality.”
The IMF predicted the Gulf Cooperation Council––which includes the United Arab Emirates, Saudi Arabia, Kuwait, Bahrain, Oman and Qatar––would collectively increase economic growth by 6.4% this year, from 2.7% growth last year.
Last weekend, Saudi Arabia’s largely state-owned energy firm, Saudi Aramco, underscored the gains made by gas- and oil-rich countries during the energy crisis by revealing profits in the three months to the end of June jumped 90% to $48 billion.
It is one of the largest quarterly profits in corporate history and represents a fillip for PIF, a backer of the company. PIF, chaired by the crown prince, Mohammed bin Salman, invested more than $7.5 billion in US stocks in the second quarter of the year.