The year 2018 holds much promise for the GCC, including the Sultanate, on both oil and economic fronts. While Dr Mohammed bin Hamad al Rumhy, Minister of Oil and Gas, allayed fears over oil prices, saying: “There is no worry about the current rise in oil price, which will remain good at $65-70 per barrel.” Analysts have predicted a stable growth for GCC economies, which is expected to boost the overall job market. Oman is expected to be among the forefront in terms of growth increase. The minister made the statement while speaking to a regional business channel. Oman crude traded at $66.44 for March 2018 on January 12.
According to Worldoil.com, the Energy Information Administration (EIA) January ‘Short-Term Energy Outlook’ has forecast Brent crude oil to average $60 per barrel in 2018 and $61 per barrel in 2019, slightly higher than the $54 per barrel average in 2017. In both 2018 and 2019, EIA expects the total global crude oil production to be slightly greater than global consumption, with US crude oil production increasing more than any other country. Most banks in the GCC, except in Qatar, will see a stabilisation of their financial profiles this year, rating agency Standard and Poor’s (S&P) said in its recent report.
After two years of significant pressure, GCC banks will have recognised most of the impact of the softer economic cycle on their asset quality by mid-2018, said the report. “GCC banks’ liquidity improved in 2017. We do not foresee a major change in 2018,” said Mohamed Damak, credit analyst at S&P Global Ratings. “We think GCC banks’ cost or risk will increase in 2018 because of the adoption of IFRS 9 and higher amount of restructured and past dues, but not impaired loans sitting on their balance sheets,” he said. IFRS 9, an International Financial Reporting Standard (IFRS) designed by the US-based International Accounting Standards Board (IASB), deals with the accounting of financial products.
“But we also think the general provisions that the GCC banks have accumulated over the years will help in smooth transition to new accounting standards,” Damak added. The overall economic growth in the region is also set to improve in 2018, according to another report. The growth is driven by oil price recovery and efforts to diversify the economy and improve investment climate. Oxford Economics had predicted the six members of the GCC will grow by around 3 per cent compared with just 0.3 per cent in 2017. The report expects Oman to lead the GCC countries in terms of growth.
According to the Budget 2018, the growth rate is projected to be positive at a rate of at least three per cent in 2018, driven by oil price recovery, and efforts to diversify the economy and improve investment climate. According to Hays, recruiting analyst, nearly 71 per cent of employers based in the region plan to hire additional staff in 2018.