(MENAFN - Khaleej Times) The collective assets of Sovereign Wealth Funds, or SWFs, in the GCC surged to an all time high of around 1.7 trillion at the end of 2012, boosted by mounting fiscal surpluses on the back of high oil prices, Moody's Investors Service said in a new report.
The London-based rating agency said in a report that the assets controlled by SWFs in the GCC climbed by nearly 700 billion from their level of around 1 trillion at the end of 2007.
Moody's observed that the GCC economies have benefited from large foreign-exchange inflows driven by oil revenues, adding that some of the windfall has been spent through the governments' fiscal accounts while the rest was placed in SWFs, reinforcing their financial strength.
All GCC countries are likely to have a positive net international investment position (IIP), although only Bahrain and Kuwait report an IIP to the IMF, it said.
"For all GCC countries, we estimate that the countries' SWF assets now exceed central government liabilities," report said.
At the end of 2012, Gulf SWFs reached an aggregate 1.7 trillion in assets (equivalent to 110 per cent of the aggregate GDP), up from around 1 trillion in 2007 (nearly 116 per cent of GDP).
It said the funds compare to an aggregate central government debt level of 2.363 trillion at the end of 2012. But it added that the debt levels vary greatly across countries, with some countries having government debt in excess of 20 percent of their GDP, most of which is domestically funded.
"The vulnerability of GCC government finances to a sudden fall in oil prices is mitigated by their massive SWF assets," Moody's said.
GCC sovereign funds account for 32.6 per cent of the global SWF assets valued at 5.2 trillion.
2012 Sovereign Wealth Fund Allocation Report shows that the world's top 36 SWFs totalled nearly 5 trillion. Oil and gas-related SWFs comprised the majority of the overall dollar amount, at 57.3 per cent. With 40.5 per cent of the total pie, Asia was the region with the largest share, followed by the Middle East with 35.6 per cent.
In the latest 2012 ranking, the Abu Dhabi Investment Authority tops the list at 627 billion, followed by Norway's Government Pension Fund"Global (611 billion) and China's SAFE Investment Company (568 billion). Many of the world's largest SWFs are financed via oil revenue, such as in the case of the Abu Dhabi Investment Authority and Norway's Government Pension Fund"Global.
TheCityUK, a London-based group tracking the financial services industry, said the assets of SWFs funded by commodity exports - a category including Gulf funds and Norway's Government Pension Fund - totaled 3 trillion at the end of 2012, or 58 percent of the total.
According to TheCityUK study, sovereign wealth funds are set to see their assets grow to 5.6 trillion by the end of 2013, a sum more than double British GDP and underscoring their status as the world's wealthiest investors. According to the Moody's forecast, GCC's 2013 current account surpluses will range from a high of 38.6 percent of GDP for Kuwait, to a low of 9.8 percent of GDP for Oman. "These are exceptionally high levels - the median for all investment-grade emerging market economies, excluding the GCC, is a negative 0.6 percent of GDP."
The report projected oil prices at an aver age 112 per barrel in 2013.
Moody's report said increased crude oil output and high prices since 2011 have boosted real GDP growth in the GCC to an average of 6.6 percent in the past two years. With oil output and prices stabilising, "we expect that growth in the GCC will decelerate to an average of around 3.5 per cent in 2013, with Qatar likely to post the highest growth rate (5.1 per cent) and Kuwait the lowest (2.1 per cent)."
