Oman’s economy is poised to record an improved performance next year based on the projected growth rate, budget deficit and balance of payment situation. This is supported by a host of data published by the International Monetary Fund this month after a review of the sultanate’s fiscal and monetary situation.
Undoubtedly, any improvement for the economy in an environment of low oil prices is no easy business. That it might turn out to be so is testimony to the ability of its authorities in producing results.
Among other things, the IMF expects the Omani economy to register a real growth of 3.7 per cent in 2018. The figure is notable in normal circumstances, let alone in the ongoing challenges associated with the phenomenon of low oil prices and the need to reduce expenditures where possible.
Concurrently, an absence of inflation on the back of limited disbursement on the part of the public sector is a net contributor to the phenomenon of a spike in real growth rates. In addition, the IMF expects the budget deficit to fall from 18.6 per cent of GDP in 2015 to 14.3 per cent in 2018, which in itself would be a notable achievement.
Oman’s 2017 budget assumes expenditures and revenues of $30.1 billion and $22.4 billion, and thereby a projected deficit of $7.7 billion. Projections for fiscal year 2018 call for stronger income and lower shortage.
Looking forward, revenues should increase via the adoption of several measures like raising fees for governmental services and introducing fresh ones. What’s more, starting 2018, the treasury is expected to generate income from excise tax on the one hand and value-added tax on the other.
Within the Gulf Cooperation Council, Saudi Arabia implemented an excise tax in June on tobacco products plus energy drinks and carbonated beverages, and the UAE did so on the so-called “sin” products early this month.
Bahrain could implement an excise tax anytime in early 2018. The cabinet has agreed to put a 100 per cent tax on tobacco products as well as energy drinks and 50 per cent on carbonated beverages. The next step involves endorsement by the legislative body.
Returning to Oman, the IMF expects improvement in the current account deficit from 18.6 per cent of GDP in 2016 to 14.3 per cent in 2017 and then 13.2 per cent in 2018. In reality, the entity sees an opportunity to reduce current account deficit to 6.1 per cent of GDP in 2022, clearly showing a steady progress.
Omani officials are working to gradually enhance export opportunities for goods, notably consumer products produced in the industrial area of Sohar. The sultanate has a number of industrial parks and free economic zones plus ports, collectively providing the means to enhance export earnings.
Then there is the issue of the much delayed inauguration of a new terminal at Muscat International Airport. I learnt during a recent stopover in Muscat that the partial opening of the airport is expected before the year-end with the grand opening delayed to the first-half of 2018.
Certainly, inauguration of the terminal is particularly vital for government-owned Oman Air, as it seeks to strengthen its position amid competition from regional giants. The current terminal boasts no air bridges for boarding passengers, something that can be annoying. The GCC experience shows an airport facility can help make progress in sectors like tourism, events management and exhibitions.
The Omani economy is projected to produce attractive results. Yet, these projections must be tested and fully realised.
The writer is a Member of Parliament in Bahrain
