Times could not be better for Oman's economy as evidenced by sharp growth of its gross domestic product (GDP), though not at the expense of inflation as well as registration of notable budgetary surplus, all in 2011.

Official statistics point to a robust 22.7 per cent growth in nominal GDP arriving at a record $72.7 billion (Dh266.8 billion). This surge strengthens ranking of Oman's economy as the fifth strongest among fellow Gulf Cooperation Council (GCC) countries. At $26 billion, Bahrain's GDP in nominal terms falls considerably behind that of Oman's.

Certainly the credit for positive developments in Oman's economy is goes to movements within the petroleum industry, particularly matters related to crude oil. Crude oil alone accounts for 62 per cent of treasury income.

The authorities prepared the budget for fiscal year 2011 assuming a conservative $58 per barrel. Yet, actual revenues increased by almost 45 per cent on the back of stronger oil prices versus the projected average. Not surprisingly, the fiscal year ended with a resounding surplus of $2.5 billion, a far cry from the original projected shortage of $2.2 billion.

To be sure, stronger than projected income paved the way for an increase in public expenditures by around 9 per cent with all ensuing positive spillover effects on different economic sectors. Concurrently, oil output stood at 884,900 barrels per day (bpd) in 2011 up by 2.3 per cent compared to that of 2010.

Partnership

The timely development reflects on-going investment in oil fields as part of partnerships with international oil firms. One such example is the growing output of the Mukhaizna field. Occidental of the US and its partners won a concession in 2005 to develop the field after committing themselves to investing some $2 billion, as part of efforts to increase Mukhaizna's production to 150,000 bpd.

Understandably, government spending is vital by virtue of accounting for more than one-third of GDP. Thereby, changes in public sector spending have their bearings on the economy including the mood of private sector investors.

In turn, stronger public sector spending boosted the confidence of private sector investors, who opted to follow suit. Undoubtedly, return of confidence was essential following a period of civil disturbances.

Happily, surging econ-omic growth has not come at the expense of extraordinary inflationary pressures.

The IMF put the inflation rate at 3.6 per cent in 2011, though not materially different from that of 3.3 per cent recorded in 2010.

Valid reasons

The rise is attributed to some valid reasons, namely the steady increase in imported food prices as well as the rise in public sector spending.

The strong economic growth rate coupled with the steady rise in spending should help the sultanate address some pressing outstanding challenges, especially creating jobs for the local population.

It is believed that the jobless rate stands anywhere between 12 and 15 per cent among eligible Omani nationals.

But in the absence of a taxation regime, actual unemployment is not an exact science, as some of the jobless engage in work activities in order to meet living expenses.

All told, Oman ended up having an exceptional performance in 2011, clearly reflecting carefully crafted government policies.

Still, conservative econ-omic policies are likely to remain the order of the day in the sultanate for the foreseeable future. One proof of this is assumption of an average oil price of $75 per barrel for fiscal year 2012, yet below prevailing market rates where oil prices are hovering around the $100 mark.

 

The writer is a Member of Parliament in Bahrain.