The Omani government is expecting the economy to bounce back strongly in 2010, following slower growth in 2009 as a result of the global financial crisis.
The minister of national economy, Ahmed Macki, was reported on January 2 saying that he anticipated Oman's GDP to grow by 6.1% in real terms during 2010, with inflation remaining relatively stable at 3.5%. Macki also revealed to the public that Oman's debt as of the end of 2009 stood at RO722m ($1.88bn), with RO252m ($655m) held domestically. The 2008 debt figures are not available (no IMF article IV consultation was held last year, and the Central Bank of Oman does not report debt figures). However, in 2007 national debt stood at RO1.001bn ($2.6bn), indicating that the government is continuing to pay down debt.
The government's prediction is relatively bullish, considering Macki revealed in mid-December 2009 that growth figures were a relatively disappointing 1-2%, due in large part to low oil prices in the first half of the year. Indeed, the figures undercut the IMF's prediction of 4.1% growth for 2009. Looking ahead to 2010, the IMF predicts more modest growth than the government, at around 3.8%, with inflation at 3%.
However, there is perhaps reason to favour the government's more optimistic assessment. Favourable business reforms, such as the standardisation of the tax rate for foreign firms from 30% to 12%, should see renewed interest in the Sultanate as an investment destination. Externally, the strong double-digit growth expected in China this year is likely to result in high average prices for oil, which will boost government revenues and allow the government to continue its investment programme. Tourism, too, is likely to bounce back in 2010, as the wealthier clientele that represents Oman's key market spreads its wings once again in the more favourable economic conditions.
There remain potential clouds on the horizon however, particularly in the shape of a possible fallout from neighbouring Dubai's recent problems. While Oman's internal economy remains relatively well-insulated from this, there remains a series of cross-investments between the two states that have the potential to cause concern - though not, in all likelihood, significant problems. Indeed, the Sultanate's long-standing rejection of the so-called "sharia-compliant" finance model has stood it in relatively good stead, limiting the exposure of Omani banks to only $77m of investment in the troubled Dubai World, and no exposure at all to the $26bn sukuk that Dubai World is attempting to reschedule.
In light of the more benign economic conditions that are expected this year, the government is already anticipating state revenues to be 14% higher than in 2009, an increase of RO766m ($1.99bn). Expenditure, on the other hand, will likely grow more slowly at 9%, or RO573m ($1.48bn). The difference should enable the government to further pay down national debt, should it choose, as well as to keep a handle on domestic inflation, and top up the State General Reserve Fund (SGRF). Meanwhile, as 2010 brings to a close the current five-year plan, policymakers in the Sultanate will be focusing attentions on the next five-year period.Global Arab Network
This article is published in partnership with Oxford Business Group