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04 October 2023

Oman economy surges 52 per cent in first nine months of 2008

A large increase in oil prices and the country's crude output boosted Oman's GDP in 2008. (AFP)

By Nadim Kawach

Strong oil prices allied with higher production to boost Oman's economy by a staggering 52 per cent in the first nine months of 2008 and this kept inflation at record high levels, official figures showed yesterday.

A big leap in the gross domestic product in the third quarter contributed to that growth but the performance was expected to have largely receded in the last quarter as a result of a steep fall in crude prices.

The figures by the Omani Ministry of National Economy showed the GDP jumped by around 61.4 per cent in the third quarter, its highest quarterly nominal growth in the Gulf country's modern history.

"In the first three quarters, the GDP grew by 52 per cent and this was a result of a large increase in oil prices and the country's crude output," it said.

In the third quarter, the oil sector shot up by 96.3 per cent compared with around 58.6 per cent in the second quarter and 62.7 per cent in the first quarter. The non-oil sector also soared by 48.8 per cent in the third quarter.

The report gave no figures for prices and production but according to Opec, its basket averaged around $113 a barrel in the third quarter of last year compared with $117 in the second quarter and $92 in the first quarter.

The decline in the average in the third quarter was largely offset by a surge in Oman's crude output, which averaged around 780,000 barrels per day compared with 745,000 bpd in the second quarter and 707,000 bpd in the first quarter, according to data by the Omani Ministry of Oil.

The increase was in line with plans by the government to push up crude production to 790,000 bpd in 2008 after a steep fall in output over the past five years because of lower than expected oil investment to fund gas projects.

Oman, which is not a member of the 12-nation Opec, pumped nearly 714,000 bpd of crude oil in 2007, far lower than the 2002 peak of 898,000 bpd. Production has steadily receded during that period, dropping from 328 million barrels in 2002 to 299 million barrels in 2003 and 285 million barrels in 2004. It reached 283 million barrels in 2005 and 269 million barrels in 2006.

Production dived to 259 million bpd in 2007 but the government said output would recover sharply as it based its 2008 budget on higher oil production.

The surge in output and prices boosted Oman's total revenues in the first nine months of 2008 above RO6 billion (Dh57bn) for the first time since the country began pumping crude three decades ago.

Actual oil and non-oil revenues soared to an all time high of RO6.2bn surpassing the country's total 2007 income of around RO5.9bn, according to the Ministry of National Economy.

The surge largely boosted Oman's fiscal surplus, which peaked at an all-time high of RO1.567bn in the first eight months of 2008 compared with RO652.4bn in the same period of 2007.

The report showed inflation in Oman remained at record high levels, soaring by 13.2 per cent in the third quarter compared with the third quarter of 2007.

But it was as low as three per cent compared with the second quarter while it stood at only 1.8 per cent in the last quarter. Like other Gulf oil producers, strong oil prices have turned Oman's internal and external fiscal deficits into surpluses over the past five years and sharply boosted growth its economy, which galloped by 13 per cent from RO13.73bn in 2006 to RO15.5bn in 2007.

Growth to slow

Oman's economic growth is expected to fall to two per cent in 2009 due to the impact from oil price declines, Standard Chartered said yesterday.

That country's ministry for commerce and industry said on Tuesday that growth would slow to one to three per cent for the year. "The decline in oil prices will have a significant impact on the economy since hydrocarbons account for 75 per cent of Oman's exports," said economists Mary Nicola and Marios Maratheftis.

Standard Chartered economists, however, said that despite the slowdown in growth, the benefit for Oman is the drastic decline in inflation. Inflation had peaked into the double-digits last year due to high commodity prices.