GDP in the nation set to see 4.6 percent growth as the fiscal surplus surges and the debt declines.
Rising oil prices and increased production will drive a financial boom in Oman this year, as the real GDP is forecasted to grow by about 4.6 percent and both the current account and the budget surplus climb to new heights, based on a report out of the West.
Oman, not a member of OPEC, will experience an increase in the nominal GDP, seeing it climb almost $17 billion throughout the coming year. At the same time the debt will fall under 5 percent of the GDP and the foreign reserves will reach almost $16 billion, according to an IIF report. The Institute for International Finance is based in Washington.
Even though protests have occurred in the Gulf nation, unrest has been more moderate than in other Arab countries. The political criticisms have been looked after efficiently and comprehensively, according to the IIF.
The report noted that those economic measures put through by the Omani government addressing social issues should result in the creation of 50,000 jobs, including 35,000 public industry positions and 15,000 positions in private industry.
Minimum wage increased to reach RO 200 monthly (or $520) and those registered with the Ministry of Manpower who are unemployed but searching for work are eligible for unemployment benefits totaling RO 150 monthly.
It is probable that the turmoil will not significantly impact growth. Expectations are that the growth rate will be around 4.6 percent, similar to those in 2010. Without OPEC restrictions the output of crude oil should increase by around 3.9 percent this year, as the production levels for gas increase by almost 12 percent with previous investments in the enhancement of oil recovery continuing to be fruitful.
At current price levels, the GDP of Oman is forecasted to surge from about $57.2 bn recorded last year to almost $74.8 bn this year before reaching a record level of $77 bn next year.
The IIF, grouping several Western banks, also projected that the non-hydrocarbon industry will continue on a path of recovery after the 2009 decline as fresh capacity comes online in the downstream gas sector.
Tourism has not been affected for the most part by the social turmoil and all signs point to a decent performance for 2011. The IIF also noted that the construction industry will see a boost through continuing developments and infrastructure plans.
High prices for oil should create significant surpluses in both the current account and the budget for 2011. Despite the additional spending that has been approved, boosting both capital and current expenditures, Oman’s fiscal position continues to be strong. The budget surplus for 2011 may surpass 10 percent of the GDP.
This will result in the government debt falling under 5 percent of the GDP. State authorities will then be able to put through transfers to reserve accounts and specifically the SGRF (or State General Reserve Fund).
Government debt continues to maintain a low level and the soaring oil prices and rise in tourism should result in record high current account surpluses for 2011, above 20 percent of the GDP. This will cause a further rise in the foreign exchange reserves, which will reach around $16 billion according to the IIF. The study noted that this figure is adequate to cover the value of imports for six months.
Rising domestic demand and increasing food prices created upward inflationary pressure in the latter part of 2010. By December the one year rate had hit 4.2 percent. Since that time period inflation has slowed down and the IIF expects that it will not be an issue in 2011.Paul Holdsworth, Staff Writer, Gulf Jobs Market News