MUSCAT, July 21 – On the back of high oil prices and prudent spending, the government has managed to trim its fiscal deficit to RO 1.095 billion by the end of May this year. The deficit remained as high as RO 2.035 billion in the corresponding period last year.
Although recovery in the price of crude oil in the international markets is seen as the major reason, rising revenues from other sectors also contributed to the drop in the deficit.
“The deficit is shrinking fast this year after it rose in 2015 and 2016. This is becoming possible mainly thanks to the surge in the value of our oil exports,” said a senior analyst with a national bank.
In 2016, the budget deficit widened to RO 5.3 billion that was almost 22 per cent of the GDP.
But in 2017 it was trimmed to RO 3.5 billion and in 2018 it was brought down to RO 3 billion, which was equivalent to 10 per cent of GDP.
“The oil prices made further gains and the price of Omani crude oil averaged above $62.9 a barrel against $51.6 a barrel during the same period last year,” he said.
He said a boost in the hydrocarbon sector is expected to drive the recovery further as the Khazzan gas production expands. According to the analyst, the government’s diversification initiatives, which are centred around non-oil exports and tourism, should support the fiscal spending.
Figures from the National Centre for Statistics and Information (NCSI) show the total expenditure during the first five months of the current year increased by 6.1 per cent to RO 4.836 billion.
The expenditure stood at RO 4.557 billion during the same period last year.
According to the NCSI figures, current expenditure rose by 12.5 per cent to RO 3.575 billion and investment expenditure grew by 1.1 per cent to RO 1.070.8 billion.
At the same time, net oil revenue increased by 34.8 per cent to RO 2.382 billion during the period January to May as against RO 1.766 billion during the corresponding period last year.
Revenues from natural gas grew by 17.4 per cent to RO 682.60 million while Customs duty and corporate income tax contributed RO 88.50 million and RO 352.30 million respectively during the same period.
In addition, capital revenues shot up to RO 75.4 million during the first five months of 2018, registering a growth of 1008.8 per cent over the same period of last year.
Reports show that in 2018, Oman’s economic outlook is brighter than in 2017, when growth was negatively affected by reduced oil production.
According to a report by the World Bank, Oman’s economic growth is set to modestly recover over the medium-term with GDP expected to increase by 2.3 per cent in 2018 and 2.5 per cent in 2019.
The IMF forecast that the economy will grow by 2.1 per cent this year and could achieve a 4.2 per cent growth in 2019. Business Monitor International, in a recent report, said that economic growth in Oman is expected to accelerate this year and next