MUSCAT: A new World Bank report on the Gulf Cooperation Council (GCC) states foresees a significant improvement in the Sultanate of Oman’s fiscal and external positions in 2022, on the back of rising hydrocarbon production and non-oil revenues. At the same time, continued curbs on public expenditures are anticipated to further strengthen the country’s finances, it noted.
The latest GCC Economic Update warns, nonetheless, of downside risks as well, notably, potential resurgent pandemic pressures, volatility in oil prices and slower implementation of the government’s reform programme.
“After a difficult 2020, Oman’s economy is on a solid path to recovery amid the easing of pandemic pressures, higher hydrocarbon outputs, and wide-ranging government reforms. Frontloaded fiscal reforms, including VAT and cuts in spending are expected to turn the country's fiscal and current account deficits into surpluses, starting from 2022'', the Washington DC-headquartered international financial institution stated.
The report affirms that a ‘gradual’ recovery is under way as the Omani economy recoups from the “dual impact” of global pandemic and the associated collapse in oil prices. Overall growth is estimated at 2.1 per cent in 2021, buttressed by a 2.2 per cent increase in hydrocarbon GDP, an uptick in oil production stemming from the easing of Opec+ curbs, and the commissioning of a new Liquified Petroleum Gas (LPG) plant in Salalah.
The World Bank report further noted: “Non-oil GDP is estimated to have rebounded by almost 2 per cent in 2021, signalling the recovery of domestic and external demand, aided by increased vaccine penetration that boosted the sectors most impacted by the pandemic (tourism, hospitality and retail). Annual inflation switched from negative territory in 2020 and picked up to an average of 1.5 per cent in 2021, due to the introduction of VAT last April and to improved domestic demand.”
Importantly, GDP growth is projected to surpass 5 per cent in 2022, while the economy strengthens in the medium-term, buoyed by a combination of strong hydrocarbon output and ongoing structural reform. The hydrocarbon sector itself is anticipated to grow by more than 8 per cent, fueled by higher natural gas output from the Khazzan and Ghazeer fields in BP’s Block 61, it noted, adding that the non-oil economy will grow by over 2 per cent in 2022 as well.
However, overall growth is projected to decelerate to an average of 2.7 per cent annually during 2023-2024, although the hydrocarbon sector is expected to remain the main driver of growth, the World Bank added in its update.