Economy grows faster than estimated at 6%

Muscat: Oman's economy grew by a faster-than-expected 6 per cent last year, and robust crude oil prices enabled the non-Opec oil producer to overspend on its 2010 budget, a finance ministry official said yesterday.

Analysts see growth slowing this year to 4.6 per cent due to slower revenue growth from oil and gas.

Countries in the Gulf, the world's top oil exporting region, tend to overspend from their budget plans if crude prices are strong. Fiscal policy is a key tool to steer their economies as most Gulf currencies, including the Omani rial, are pegged to the dollar.

"GDP growth in real terms was 6 per cent in 2010," the official, who spoke on condition of anonymity, told Reuters.

"Because of high oil prices in 2010, the government has spent 7 per cent more compared with forecast spending," the official said.

Economic growth was much stronger than 3.7 per cent growth in 2009. It also beat an official forecast for 5 per cent growth in 2010, and a Reuters poll forecast of 4.6 per cent growth, as oil prices surprised on the upside.

Data yesterday showed Oman sold its crude at an average price of $76.64 (Dh281.88) a barrel last year, well above $50 a barrel assumed in the 2010 budget.

Yesterday, crude oil for March was trading at above $89 a barrel.

"Enhanced oil production will have a positive impact on growth but also recovery in the global economic environment and global oil prices," said Farouk Soussa, Middle East chief economist at Citi in Dubai.

"In 2011 we expect a lower growth rate of about 4.5 per cent," he said, adding that was due to slower growth from gas and oil as the energy industry has reached peak capacity.

Export jump

Data yesterday showed Oman's exports jumped 32.7 per cent in September last year from a year earlier. The Gulf Arab country's government set spending in the 2010 budget at 7.18 billion rials (Dh68.49 billion). Oman's budget deficit widened to 287.4 million rials at the end of November, data also showed yesterday. Inflation accelerated to 4.2 per cent year-on-year in December and prices rose 0.7 per cent from the previous month.

Increase on the cards

• 4.2% year-on-year rise in inflation in December
• 7.18b rials spending set in the budget