The latest Boston Consulting Group (BCG) report shows that the United Arab Emirates (UAE) and Saudi Arabia are poised for robust financial growth in the coming years. The document is titled “Global Wealth Report 2023: Resetting the Course.”
In the UAE, the report predicts that new wealth will witness a compound annual growth rate (CAGR) of 5.5 percent. This will increase the 2022 figure of $1 tn to $1.3 tn by 2027. Meanwhile, BCG projects that real assets in Saudi Arabia will grow from $2.7 tn in 2022 to $3.6 tn in 2027. This represents a CAGR of 5.8 percent.
Financial assets refer to stocks, bonds, and cash, while real assets include tangible assets with intrinsic value, such as real estate, infrastructure, and commodities.
UAE’s economic prowess
In 2022, equities and investment funds comprised the largest asset class at 58 percent of total personal wealth.
According to the forecast, bonds will display the fastest growth with an 8.4 percent CAGR between 2022 and 2027. On the other hand, life insurance and pensions are set to become the third-largest asset class in the country.
“Representing 13.2 percent of the Middle East and Africa (MEA)’s financial wealth in 2022 and growing at a rate of 6.5 percent per annum from 2017 to reach $1 tn in 2022, the UAE’s trajectory signals the country’s strong position as one of the preferred global destinations for the wealthy,” stated Mohammad Khan, managing director and partner at BCG.
Ultra High Net Worth (UHNW) individuals, or those worth over $100 mn, played a pivotal role, contributing around 25 percent of the UAE’s financial wealth last year. Furthermore, individuals with wealth ranging from $1 mn to $20 mn constituted 32 percent of the UAE’s wealth in 2022. This figure could grow to 34 percent by 2027.
Meanwhile, projections suggest that real assets within the UAE will expand at a rate of 6.9 percent per year, hitting $2.6 tn by 2027. Concurrently, its liabilities are anticipated to increase by 6.3 percent per year, reaching $0.2 tn by 2027.
Read: UAE’s GDP projections: 3.5 percent growth in 2023
Diversification in Saudi
Diversification is a cornerstone in Saudi’s sustained growth, aligning with its Vision 2030 goals of economic, social, and cultural expansions.
Unlike the UAE, where equities and investment funds dominate, Saudi had currency and deposits as major assets. These made up about 48 percent of total personal wealth. On the other hand, bonds will show the most significant growth with a 7.4 percent CAGR between 2022 and 2027.
The report further predicts that life insurance and pensions will be the third-largest asset class in Saudi by 2027. Moreover, Saudi could see its liabilities grow from $0.2 tn in 2022 to $0.4 tn in 2027. This mirrors a 10.1 percent CAGR.
Natalia Gerashchenko, managing director and senior partner at BCG, noted that this diversification of assets and growing interest in long-term financial planning reflects a shift toward better financial stability in Saudi.
Last year, Saudi accounted for 14.5 percent of the financial wealth in MEA. Approximately 21 percent of this wealth came from UHNW individuals.
Qatar also on the radar
The BCG report also revealed that Qatar’s wealth will grow by 5.1 percent annually to reach $388 bn by 2027. UHNW individuals are tipped to be the major contributors to this wealth growth. In 2022, approximately 38 percent of Qatar’s wealth came from UHNW individuals, worth more than $100mn. This contribution is expected to increase to 40 percent by 2027.
For more economic news, click here.
