Real GDP acceleration will largely be driven by increasing oil and gas production, according to BMI research
Oman’s economic growth is set to accelerate in 2018, thanks to a recovery in hydrocarbon production and governmental efforts to diversify the country’s economy, states a new report from global analysis firm, BMI Research. Real GDP is predicted to grow 3.4 percent next year, up from an estimated 0.7 percent in 2017.
This year’s economic slowdown was primarily the result of contractions in hydrocarbon production, while in 2018 a ramp-up in oil and gas output is expected, the report states.
Crude oil and dry natural gas output in 2017 declined by 3.0 percent and 0.3 percent respectively, but the report forecasts production to increase by 0.5 percent and 13.9 percent in the next year. Gas production will be driven by the Khazzan tight gas field while oil production will rise on the back of lower compliance with OPEC quotas amid higher prices.
The report also predicts rising oil prices, giving a much-needed boost to government revenues and broad sentiment.
From 2019 onwards, however, the report states oil and gas production is expected to decline, despite widespread exploration activities in the country, which has underexplored offshore acreage. However, thanks to Oman’s rich project pipeline – which includes more than 160 projects that are either underway or at an advanced stage of being planned – BMI Research expects real GDP to “remain relatively robust” as the investment in the non-oil sector “gathers momentum”.
It predicts economic growth to stay in the range of 3.0 to 3.5 percent in 2019 to 2022, as the government works to diversify the nation’s economy away from a reliance on hydrocarbons. Upcoming projects include the $6.5bn (AEED23.9bn) Liwa Plastics Industrial Complex, the $1.5bn (AED5.5bn) Medical City project and the $1.5bn (AED5.5bn) Al-Batinah gas-fired power plant.
While the authorities will play a limited role in financing due to fiscal pressures, the government has created an investment-friendly environment via low taxation and crime levels, high-quality infrastructures, reliable and accessible utility provision, and smooth bureaucracy, the report adds.
On Tuesday December 26, Oman’s Ministry of Finance also reported the introduction of value-added tax (VAT) had been postponed until 2019, allowing businesses more time to prepare, according to local media.