In any plausible oil-price scenario, the wealth of the nations of the Gulf Cooperation Council (GCC) will continue to grow significantly between now and 2020. At an oil price of $70 a barrel, the six nations of the GCC would earn a cumulative $6.2 trillion by 2020, or more than triple the amount they earned from 1993 through 2006. Decisions by Gulf leaders on how to use this wealth will have global repercussions for decades.
MGI research seeks to inform the discussion about the GCC countries’ impact on global capital markets by laying out the potential scale of the windfall, shedding light on the diversity and investment strategies of Gulf players, and noting some of the opportunities, challenges, and policy issues raised by the new oil boom.
MGI estimates that the total value of the Gulf states’ foreign assets reached $1.9 trillion by the end of 2006—more than double their level in 2003 and nearly equal to the GDP of India and Brazil combined or the market value of the top ten Fortune 500 companies.
In 2006, the GCC states together had net capital outflows of $202 billion, joining China to become the world’s largest sources of surplus capital.
Even with vast amounts of funds to invest, there are limits to how fast the Gulf will be able to effectively increase domestic investment and create new jobs. As a lower estimate, the GCC nations could continue to grow domestic investments by the same rates seen since 1993—6.1 percent annually. This would imply cumulative investments of $3.2 trillion by 2020, or $230 billion annually.
The petrodollars not invested locally will spill over into global capital markets. In MGI’s base case, the GCC would have $3.5 trillion of new funds to invest in global capital markets through 2020. Including asset appreciation, the added investment would raise their total foreign wealth to $8.3 trillion. The resulting nest egg would amount to roughly $270,000 for every GCC citizen at that time.
Mapping Global Capital Markets: Fourth Annual Report MGI's analysis highlights trends in the global financial markets across countries, regions, and asset classes. It finds assets reached $167 trillion in 2006, while capital flows climbed to a record $8.2 trillion. Read more
The New Power Brokers: How Oil, Asia, Hedge Funds, and Private Equity Are Shaping Global Capital Markets Even under the best circumstances, the assets of the new power petrodollars will nearly double to as much as $15.2 trillion by 2012. Read more
