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Gulf countries in line for trillion dollar windfall from higher oil prices

Higher energy prices are set to deliver a $1.3 trillion oil windfall for Middle East economies over the next four years, according to IMF data. The additional cash is likely to replenish sovereign wealth funds that have invested billions during the pandemic, but it could also ease the pressure to diversify and decarbonize, the FT’s Andrew England reports.

The IMF forecasts that growth in the large oil producers—Saudi Arabia, the UAE, Kuwait, Bahrain, Qatar, and Oman—will accelerate to 6.4% this year. The Fund’s assessment highlights how the Gulf oil producers are riding high while much of the rest of the world faces inflation, recession, and balance of payments crises. These excess funds are likely to fund a wave of domestic mega-projects and overseas investments via some of the world’s biggest sovereign wealth funds.

The prevalence of SWFs reflects the Gulf’s continued struggle with high volatility and pro-cyclical economies where oil revenues magnify the business cycle. This reality has been especially impactful following the 2014 oil downturn and recent Covid-related price collapse, which forced reduced public spending, raised debts and decreased headline growth.

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