However, the December 2018 OPEC+ agreement to cut oil production will dampen this recovery in 2019, as growth is projected to slow to 1.2 per cent, the World Bank said in its Oman Economic Update report released last week.
‘While narrowing, fiscal and current account deficits remain high, and debt ratios continue to worsen. The main risks to the economic outlook arise from a delay in fiscal adjustment, which will impede debt reduction and negatively affect business confidence and external financing costs in an adverse global environment’, the World Bank said.
It said that there will be a one-off spike in growth to 6 per cent in 2020 as the government plans to significantly increase investment in the Khazzan gas field. ‘The potential boost from the diversification investment spending would continue supporting growth in 2021 and the medium term’, the report added.
Inflation in Oman is expected to pick up to 1.5 per cent in 2019 reflecting higher consumer spending, and to further accelerate to an average of about 3 per cent in the period 2020-2021 reflecting the possible introduction of indirect taxes beyond 2019, the World Bank said.
It said Oman’s budget deficit is projected to rise to 12 per cent of GDP in 2019 due to high public spending amid lower oil prices. ‘A key risk facing Oman is that the pace of fiscal and structural reforms may slow, hurting investor confidence and prospects for debt sustainability. To mitigate this risk, the government needs to press ahead with planned reforms on revenue mobilisation (namely the introduction of value-added tax) and deeper fiscal adjustment’.