Higher oil prices and production will plunge Oman into a financial boom in 2011, with its real GDP expected to swell by around 4.6 per cent and the surplus in its budget and current account rising to new highs, according to a Western report.
Oman, which is not an OPEC member, will also see its nominal GDP soar by nearly $17 billion through 2011 while its debt will dip below five per cent of GDP and foreign reserves climbing to nearly $16 billion, said the report by the Washington-based Institute for International Finance (IIF).
Despite recent protests in the Gulf country, they have been less intense than in other troubled Arab nations, while political grievances have been addressed swiftly and more comprehensively, IIF said.
Referring to economic measures undertaken by Oman to address social issues, the report said the government has committed to creating 50,000 jobs (35,000 in the public sector and 15,000 in the private sector).
The minimum wage was raised to RO 200 ($520) per month, and anyone out of work but looking for a job (and registered with the Manpower Ministry) is to receive unemployment benefits of RO 150 per month.
“The unrest is not likely to have had a significant impact on growth, which is forecast to be similar to last year at about 4.6 per cent…with no OPEC restrictions, crude oil output is projected to rise by about 3.9 per cent in 2011, and gas production by nearly 12 per cent as past investments in enhanced oil recovery continue to bear fruit.”
In current prices, Oman’s GDP is projected to soar from around $57.2 billion in 2010 to nearly $74.8 billion in 2011 and a record high of $77 billion in 2012.
IIF, which groups many major Western banks, also expected the non-hydrocarbon sector to continue to recovery from a downturn in 2009, with new capacity coming online in downstream gas industries.
The tourism sector has been largely unaffected by the social unrest and looks set to perform well this year, it said, adding that the construction sector will be boosted by ongoing development and infrastructure projects.
“High oil prices should ensure sizable budget and current account surpluses in 2011. Although extra spending has been authorized, which will boost both current and capital expenditures, the fiscal position remains strong and the budget surplus may exceed 10 per cent of GDP this year,” it said.
“As a result, government debt should fall below five per cent of GDP. The authorities will have plenty of scope to transfer funds to the State General Reserve Fund (SGRF) and other reserve accounts.”
Government debt remains relatively low while the surge in oil prices and increase in tourism will likely produce a record current account surplus of over 20 per cent of GDP in 2011, resulting in a further increase in foreign exchange reserves to about $16 billion, according to the study, which said this is sufficient to cover about six months’ worth of imports.
“More buoyant domestic demand and higher food prices exerted upward pressure on inflation in the second half of last year and by December the 12-month rate had reached 4.2 per cent…. since then, inflation has eased back and we do not expect it to become a policy issue this year.”