Oman expects budget deficit to reach 3% of GDP in 2023 on moderate oil price assumption

Total public revenue set to rise 10% to an estimated at $30.34 billion in 2023, while public expenditure is forecast to grow 7% to $33.68 billion

Nizwa Fort, Oman's most visited national monument. Victor Besa / The National

Oman expects a budget deficit of 1.3 billion Omani rials ($3.39 billion) in 2023, or 3 per cent of its gross domestic product, after a forecasted budget surplus for 2022 as higher oil prices increased public revenue.

The Gulf country expects total public revenue to rise to 11.65 billion rials in 2023, up 10 per cent from the 10.58 billion rials of revenue in the approved budget for 2022, Oman's Ministry of Finance said in a report on its website.

Public spending is forecast to increase to 12.95 billion rials in 2023, up 7 per cent from the 2022 approved budget, according to the ministry.

The revenue and spending estimates for next year are based on an oil price assumption of $55 per barrel that takes into account uncertainty facing the global oil market, a slowdown in China's economy due to Covid-19 restrictions and the potential of a global economic recession, the ministry said.

Public debt is projected to stand at 18.6 billion rials at the end of 2023, compared to a forecast of 17.7 billion rials of debt by the end of this year, it said.

“Despite the recovery in oil prices and economic activities, the financial and economic challenges still persist, and government debt is still at high levels,” the ministry said in its report.

“Moreover, forecasts of the global economy are unstable, which calls for rationalising spending and committing to the approved allocations in the state's general budget.”

The ministry said economic and financial risks to the fiscal performance can arise from global macroeconomic conditions such as the threat of a worldwide recession, decline in global oil demand, higher interest rates, high debt servicing costs, “intensified” geopolitical tensions, supply chain disruptions, high inflation rates and climate change.

In 2022, Oman expects to post a budget surplus of 1.14 billion rials by the end of the year, the ministry said.

Public revenue is set to rise to 14.23 billion rials as oil prices averaged $94 per barrel against an assumed price of $50 per barrel, leading to higher oil revenue of 7.45 billion rials. Non-oil revenue is expected to reach 3.22 billion rials.

Public spending is forecast to reach 13.09 billion rials due to an increase in development budget allocations, a rise in civil ministries' expenditure and an increase in contributions and other expenses, the ministry said.

Public debt is projected to stand at 17.7 billion rials in 2022, as the government used the windfall from higher oil prices to repay and pre-pay outstanding debt, thereby reducing the debt-to-GDP ratio to 42.6 per cent, the ministry said.

Oman is poised to post its first yearly fiscal surplus in a decade this year, a Fitch Solutions report released in August showed.

The International Monetary Fund forecasts that Oman’s real GDP will grow to 4.4 per cent and 4.1 per cent in 2022 and 2023, respectively, from 3 per cent in 2021.