Oman to have fastest GDP growth in GCC

April 24 – International Monetary Fund (IMF) sees the fastest GDP growth for Oman at 4.2 per cent in 2019 among the GCC countries, followed by Kuwait and Bahrain.

In its World Economic Outlook (WEO) released in April 18 (earlier update was in January this year), IMF kept global growth estimates for the current year and next year stable.

Growth revisions for the MENA region was mixed, as 2018 GDP was brought down by 20 bps to 3.2 per cent in IMF’s Apr-18 WEO, due to the ongoing fiscal adjustment and geopolitical risks that weigh on oil exporters.

Nevertheless for 2019, IMF pushed GDP growth for the region up by 30bps to 3.6 percent, ascribed to a resumption of higher oil output post the expiration of OPEC production cuts.

In terms of country upgrades, IMF expects stronger momentum in domestic demand and structural reforms to result in higher growth for Egypt in 2018 (5.2 per cent) and 2019 (5.5 per cent), as estimates were revised upwards by 70bps and 20bps from Oct-17 estimates.

For Saudi Arabia, the higher oil output is forecasted to be more than offset by the ongoing fiscal consolidation measures in 2019, as GDP growth was brought down by 30bps to 1.9 percent.

In 2018, stronger oil prices are expected to aid a recovery in domestic demand, and contribute to a GDP growth of 1.7 percent (+10 bps). However for 2018, barring Saudi Arabia and Bahrain (+130bps), the IMF revised GDP forecasts for other GCC countries downwards as compared to Oct-17 estimates. For 2019, GDP forecasts of Oman (4.2 percent), Kuwait (3.8 percent) and Bahrain (2.3 percent) were raised, while the GDP growth for the UAE was brought down by 10 bps to 3.0 percent.

Higher oil prices are expected to result in better current account balances in the GCC over 2018 and 2019.

The IMF mission in its recently concluded visit to Oman welcomed the measures already been taken by the Government to address the fiscal challenges and highlighted the importance of continuing with the fiscal consolidation. 2017 was recognized as the year of consolidation where deficit has been brought down to 12.8 per cent of the GDP compared to 21 per cent in 2016.

The introduction of VAT, Custom & Excise duties, combined with tight spending limits is expected to reduce the deficit to four of GDP in 2019 according the projections by the IMF staff. The deficit is expected to gradually increase to seven per cent of the GDP in 2023.

However, this forecast is based mainly on two assumptions – the declining oil price; and higher current expenditure and debt service. Both assumptions appear overly pessimistic and must be taken with a high degree of caution, a release from the Ministry of Finance said.

According to most private and public sector forecasters, oil prices will be rising, not falling, in the next decade, due to severe supply constraints provoked by underinvestment in

Oman has been successful in substantially completing its massive infrastructure plan for instance the Duqm Special Zone, Batinah Expressway more recently the opening of the new Muscat International Airport.