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EMEA Perspectives - Finding resilience in the GCC
- As 2022 unfolds with all the uncertainties around inflation, global growth, monetary policy tightening, geopolitics and a lingering pandemic, the GCC appears to be much more resilient thanks to the strengthened fiscal position, effective pandemic management and shielded exposure to the disruptions stemming from the Ukraine war.
- The global commodity price surge creates a positive tailwind for the region, which is evident in the strong economic momentum. Public finances are boosted with budget surpluses projected even among the most vulnerable GCC economies
- GCC economies have seen a rise in inflation due to global price pressures, however the price rise has been less pronounced compared to other parts in the world. Given the currency peg, it will be a balancing act for GCC central banks to raise rates while reducing the negative impact on domestic credit and economic conditions
- After the combined shock of the oil price slump and the outbreak of the COVID-19 pandemic in 2020, the region now faces the twin challenges of: 1) staying committed to deepen structural reforms, which will be key for long-term, sustainable economic gains, and 2) addressing its economic and physical vulnerability to climate warming and the low-carbon transition. Both challenges will be key to achieve a sustainable growth model
- The investment case for the GCC is strong thanks to favourable macro and reform trends. On one hand we take a thematic approach in the region’s positioning to become a key renewable energy leader in the multi-decade low-carbon transition, and we explore related investment opportunities in our high-conviction theme “Energy Transition”. On the other hand, we see relative value in GCC debt and we hold a mildly positive view in this space with a focus on quality companies, in line with our broader strategy to build resilient portfolios