Sovereign Wealth Funds and the COVID-19 shock: Economic and Financial Resilience in Resource-Rich Countries

Bernardo Bortolotti, Veljko Fotak and Chloe Hogg

No 20147, BAFFI CAREFIN Working Papers from BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy

Abstract: Commodity (primarily oil) funds are facing today the most severe adverse shock of their history. The COVID-19 pandemic has accelerated the crisis in oil-rich nations, already hit by low oil prices and declining hydrocarbon revenues. Governments of all stripes are tapping sovereign wealth and foreign exchange reserves to stabilize their budgets and mitigate the effects of the ensuing recession. The future of SWFs is at risk. In this article, we provide anecdotal evidence about SWFs’ behavior during the COVID-19 crisis. We subsequently quantify, using updated national official statistics, the economic and financial resilience of the main resource-producing nations and link it to possible future trends in sovereign investment. We conclude that the COVID-19 crisis may induce profound changes in the industry. In the future, we expect SWFs to become more leveraged, to favor domestic over overseas investment, and to focus on broader economic and social impact than purely financial returns.

Keywords: Sovereign wealth fund; state ownership (search for similar items in EconPapers)
JEL-codes: G15 G32 G38 (search for similar items in EconPapers)
Pages: 29
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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