Oman expects 5% GDP growth, steady inflation

Muscat: Oman's economy should expand by 5 per cent this year, faster than other forecasts, while inflation is likely to remain at around current levels, a senior central bank official said on Monday.

"We are expecting real GDP [gross domestic product] growth of 5 per cent this year, especially because of higher oil production and non-oil GDP growth is good so far and the retail sector is picking up," the official, who asked not to be named, told Reuters.

He said the growth rate could be hit if the US and European economies head into recession, while economic developments in China, a major oil importer, were another uncertainty.

Analysts polled by Reuters in June expected the non-Opec crude producer to see a 4.1 per cent economic expansion this year. The International Monetary Fund estimated that Oman's GDP rose 4.2 per cent in 2010.

Inflation should range between 4 and 5 per cent this year, the official said, after it accelerated to a two-year high of 4.4 per cent in May.

"We expect inflation to continue at this level this year. Some commodity prices are high, but rent is levelling down which will balance inflation," he said.

The central bank said in June that it was likely to keep its policy stance accommodative to boost confidence in the non-oil sector, although inflation may rise due to government spending aimed at soothing social tensions.

The Gulf state, hit by social unrest earlier this year, has kept a loose policy stance since early 2009 as inflation eased from the double-digit rates of the oil-boom year of 2008. Analysts expected inflation to average 4 per cent this year.

Outlook

The official did not want to comment on the central bank's monetary policy and reserve management outlook following the recent downgrade of the US credit rating.

Oman lacks a fully independent monetary policy because, like most of fellow Gulf oil producers, its riyal currency is pegged to the dollar.