Country's real GDP is projected to expand by 3.2% in 2018 and 3.6% in 2019
Oman's economy to accelerate in 2018-19 on energy exports, BMI says
Economic growth in Oman is expected to accelerate this year and next, as the biggest Middle Eastern oil producer outside Opec boosts oil and gas exports, BMI Research said.
Real gross domestic product - GDP adjusted for inflation - is projected to expand by 3.2 per cent in 2018 and 3.6 per cent in 2019, from an estimated 0.6 per cent last year, BMI, a unit of Fitch Ratings said in a report released on Thursday. However, the outlook from 2020 and beyond is more bearish on oil and gas output and real GDP is expected to moderate, unless the sultanate makes new oil and gas discoveries, it said.
“We expect Oman to see a substantial uptick in real GDP growth over the coming quarters, on the back of rising hydrocarbon sector output," BMI said. "Oil and gas production gains will facilitate an increase in exports, as well as government revenue, which in turn will have knock-on effects on government consumption, fixed investment and private consumption.
Overall, BMI estimates Oman’s production of crude oil, refined petroleum products and natural gas to expand by 5.2 per cent in 2018 and 3.2 per cent in 2019, from 2 per cent in 2017. The recently initiated production at the Khazzan tight gas field will offer a massive boost to gas output, driving overall hydrocarbon sector growth, with oil production in particular, set to climb in 2019.
BMI forecasts an average Brent price of $75 per barrel in 2019 and $67 in 2018, which are both higher than $54 per barrel in 2017. It expects 2018 will mark the end of Opec-stipulated oil supply cuts, facilitating an uptick in production levels for producers such as Oman.
Oil proceeds make up about 70 per cent of the Oman’s government revenue. The decline in oil prices has forced Muscat to raise debt and privatise some state assets. The sultanate, which is trying to diversify its economy and cut its dependence on hydrocarbons, does not have access to the large cash buffers enjoyed by some of its GCC peers, and therefore has to rely more heavily on capital markets to plug fiscal deficits.
Moody's Investors Service this week downgraded the long-term issuer and senior unsecured bond ratings of Oman by a notch to Baa3. The agency cited larger fiscal deficits and the ongoing weakening of its economy due to subdued growth in the coming years.
The rating agency forecasts Oman’s fiscal deficit to remain at 5 to 7 per cent of GDP in the next five years. The government’s debt burden will exceed 50 per cent of GDP by 2019 and rise above 60 per cent by 2021, up from 40.5 per cent at end-2017. The Omani government, which sold $5 billion worth of bonds a year ago, tapped the debt markets again in January via a $6.5bn bond, the country's largest.