Mubasher: Oil prices continued to impact Oman’s economy; while growth was healthy in 2015 at an estimated 3.5%, it is expected to slow in 2016 and 2017 to an average of 2%, according to a recent report issued by NBK.
Growth in real estate sales slowed to 6% by March 2016 year-on-year from an average of 32% in 2015.
On the country’s domestic level, Oman intends boosting its economy by pursuing development plans, which will emphasise the role of the private sector in funding more than half of the OMR 41 billion to be spent on economy, NBK’s report said.
“Government project spending will remain instrumental to Oman’s non-oil sector, but spending will be reserved to necessary projects, dampening its lift on growth. As of 1H16, the value of awarded projects has decreased by 12% compared to the same period in 2015,” it added.
Fiscal pressures are expected to persist in 2016, but may soften in 2017; lower oil prices are expected to offset gains from the gradual reforms implementation during 2016.
“A recovery in oil prices, coupled with increased compliance with reforms, may see greater fiscal consolidation in 2017,” NBK’s report noted.
Official data shows the deficit at 17.1% of GDP (OMR 4.7 billion) in 2015, while a similar deficit is expected in 2016; though oil prices are seen to be weaker.
“In 2017, the deficit is expected to narrow, dropping to 8.4% of GDP, as additional spending cuts and revenue measures are realized and oil prices begin to recover,” it added.
“Oman may also consider implementing a VAT in 2017, one year ahead of other GCC countries, given the difficult condition of its finances,” according to NBK’s Economic Update report.
Oman’s inflation is seen rising by 2.0% in 2016 and 2.4% in 2017. NBK’s report expected a slowdown in the real estate market over the coming months to see housing costs subside.
