Private wealth in the GCC has more than doubled from 1.1 trillion in 2009 to 2.2 trillion in 2013. Since the financial crisis the region has seen spectacular wealth growth, not only in terms of the very rich but also in the doubling of affluent families. Key drivers for the growth have been a rebounding of equity markets, the transfer of oil wealth and geo-political financial migration.
A recently released report from Strategy& looks at the growth of private wealth* in the GCC** area since the financial crisis. One side of the report aims to give a fact based assessment of the economic potential in the region. While the financial crisis hit the region hard, with considerable wealth evaporating in the period following the collapse and bailout of systemically important financial institution, growth in the GCC over recent years has been the most consistent of the emerging markets. Since 2009 private wealth in the region has doubled, growing at a compound annual growth rate (CAGR) of 17.5% year - up from $1.1 trillion to $2.2 trillion in 2013.
Particularly the United Arab Emirates (UAE) has had strong growth, with a 25% CAGR, followed by Oman at 21%. In terms of total wealth, Saudi Arabia and UAE control the majority of the regions private wealth, at 74%, up from 71% in 2009.
In terms of categories controlling wealth, most of the value is in the hands of the regions HNWIs, which own 41% of the wealth, followed by the UHNWIs, controlling 34% of the wealth. The affluent have seen the highest creation of wealth, with a CAGR of 21%, they have managed to more than double their wealth in absolute terms from $261 billion in 2009 to $560 billion in 2013; lower but by no means doing poorly are the HNWIs whose wealth grew by 76% and UHNWIs’ wealth growing by 94%.
On top of improving market conditions, another driver for the dramatic increase in the wealth of ‘affluents’ is the increase in the group’s sheer size. Between 2010 and 2013 the number of affluent individuals increased from 850,000 - 880,000 to 1.25 million - 1.35 million, a nearly 50% increase. Particularly the UAE have grown in the past four years, with the GCC growing its share of affluent households from 16% to 26% between 2009 and 2013.
There have according to Strategy& been a number of drivers for the increase of wealth in the region. One driver has been the strong rebound of global equity markets, which have grown by as much as 50% between 2009 and 2013, the authors account for around 40% of the wealth gain emanates from the markets’ changing fortunes. Another key driver noted by the consultancy is the high oil price, which helped the various emirates fund mega-projects which has in turn created a large number of jobs and transferred considerable oil wealth to segments of the population. The economic woe of the West has also provided impetus for capital to look for opportunities in the developing world, with the GCC a region a key contender, creating further opportunities for wealth creation. Beside financial changes, geopolitical conditions in surrounding regions has created a wave of financial migrants looking to take their money out of volatile regions, such as Tunisia, Egypt, Iraq, Libya and Syria. The UAE has done particularly well from the movement of wealthy individuals to the region, with many of them pulling most of their wealth out of the affected countries.
* “Affluent” means any household with stable investable assets of more than $200,000 on an annual average basis. The high-net-worth bracket (HNWIs) begins at $1 million of investable assets, while the ultra-high-net-worth (UHNWIs) segment threshold is at $50 million. Non-investable assets are excluded.
** Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.