Policymakers in Oman have been steadfast in their espousal of a conservative mindset on economic policies. Recent statistics released by the Central Bank of Oman confirm just such a tendency.

The CBO noted that the country’s gross domestic product (GDP) at current prices grew by 2.8 per cent in 2013, and down from the 11.5 per cent achieved in 2012. This partially reflects the modest 3.2 per cent rise in budgetary spending in fiscal 2013, and down appreciably from the 26.2 per cent in 2012.

Public sector spending is essential to fuel economic activities in the Sultanate. But, clearly, the authorities are now heeding calls, including those voiced by the International Monetary Fund, for restraint on public sector expenditures and thus make them sustainable.

At a nominal GDP of $80, Oman’s economy is only larger than that of Bahrain within the six-nation Gulf Cooperation Council (GCC). The sharp drop in GDP growth levels has all but wiped out inflationary pressures, which stood at a mere 1.1 per cent in 2013 and down from 2.8 per cent in 2012.

Many economists consider inflation as the greatest threat to the well-being of any economy, even worse than unemployment. The argument suggests that unlike joblessness, inflation adversely affects all though at varying degrees.

Mirroring the country’s renewed conservative economic policy, average oil output in Oman increased by 2.3 per cent in 2013, hence, continuing the slow, though steady, growth. Oil production stood at 941,900 barrels per day in 2013, up from 918,500 bpd in 2012.

Official data points out that the average oil price amounted to $105.5 a barrel, considerably above the $85 a barrels used in preparing the 2013 budget. By comparison, the international oil price for Omani oil averaged $109.6 per barrel in 2012.

However, there is the issue of lifespan of the sultanate’s hydrocarbon production at current rates, as suggested in a recently-released report by Standard & Poor’s, a premier rating firm. Yet, thanks to utilisation of enhanced oil recovery technologies as well as upstream investments, the country has succeeded in sustaining oil reserves at 5.5 billion barrels for several years in a row.

This is evidenced by numbers from the BP Statistical Review of World Energy June 2014, which puts Oman’s oil reserves at 5.5 billion barrels for 2013 and 2012. The same principle remains valid for natural gas, with reserves of 0.9 trillion cubic metres in 2013 and 2012, much higher than the 0.2 trillion cubic metres in 1993.

On a negative scale, the S&P report contends that Oman has the second highest breakeven oil price among GCC states, only after Bahrain. It suggests Bahrain’s oil price must be $18 a barrel higher than current oil prices to achieve a balanced budget. Certainly, Oman needs to maintain a smaller, but still higher than market price, to achieve equilibrium in its public finance.

Economic stability is credited for helping bring about sizeable inflows of foreign direct investments (FDI), as is evident from the World Investment Report 2014 by the World Conference on Trade and Development (Unctad) released in June.

FDI inflows in Oman amounted to $1.6 billion, a growth of a record 56 per cent. The UAE leads the GCC with FDI inflows of $10.5 billion.

Ostensibly, a conservative economic policy does pay off, guaranteeing more than anything else stability.

The writer is a Member of Parliament in Bahrain.