An anticipated contraction in the Omani economy in 2020, attributable to the oil price downturn and the public health response to the novel coronavirus (COVID-19) pandemic, is expected to give way to a recovery in 2021-22, according to the World Bank.
The international financial institution said in its latest ‘Economic Update’ for the Sultanate that the uptick will be spurred by an increase in gas output as well as infrastructure spending.
“Significant new gas production in 2021 along with diversifying the economy in sectors such as manufacturing, tourism and fishing will support the growth momentum and lessen the risks,” the Washington DC-headquartered body said in its report for April.
But the slump in international oil prices will weigh on the economy this year, the global organisation warned. “Low oil prices and the spread of COVID-19 are the key challenges that Oman will need to navigate in the short-run. With oil prices in the mid-$30s in 2020 and constrained oil demand, growth is expected to contract by 3.5 per cent,” it said.
Also disadvantageous in the present circumstances is the Sultanate’s exposure to the Chinese market, which accounts for 45 per cent of total Omani exports (or 21.7 per cent of GDP), mostly in the form of oil exports, the WB report noted. With China in the throes of a slowdown fuelled by the pandemic, imports have dramatically fallen in recent weeks and are expected to maintain a downtrend this year.
Significantly, both the hydrocarbon and non-oil sectors of the Omani economy are expected to witness a contraction this year owing to the slump in oil prices as well as the impacts of the pandemic, says the World Bank.
“Real GDP growth is estimated to have decelerated to 0.5 per cent in 2019, down from a recovery of 1.8 per cent in 2018. This is largely driven by 1 per cent (y/y) decline in oil production, capped by the since-lapsed OPEC+ production deal. The non-oil economy is estimated to have been subdued due to the slowdown in industrial activities and services sector. Inflationary pressures are estimated to remain muted at 0.1 per cent in 2019, reflecting weak domestic demand and tame food and housing prices.”