Oman, the biggest Middle East oil producer outside Opec, is forecasting economic growth of at least 3 per cent and a fiscal deficit for 2018 equaling the shortfall of 2017 as the sultanate's spending boost is offset by an uptick in revenues on the back of higher oil prices.
The Arabian Gulf state is projecting a 3 billion rial (Dh28.65bn) fiscal deficit that is equivalent to 10 per cent of its GDP, the finance ministry said in a statement carried by the state-run Oman News Agency on Monday.
Government revenue is projected to rise by 3 per cent to 9.5bn rials, based on an oil price projection of US$50 a barrel this year, while spending will increase by 6.8 per cent, or 800 million rials, in 2018 to 12.5bn rials.
Last year’s budget was based on an oil price estimate of $45 a barrel.
The sultanate is projecting its GDP to expand by at least 3 per cent this year, supported by the recovery in oil prices and its diversification drive. Oman is one of the smaller producers of oil in the Arabian Gulf region and is struggling to narrow its fiscal deficit in the aftermath of Brent oil prices falling from the mid-2014 high of $115 a barrel to the current level of around $65 a barrel. The country is trying to diversify its economy away from oil and plans fiscal reforms to offset the impact of lower oil proceeds as it lacks the financial buffers enjoyed by several of its peers such as Saudi Arabia and the UAE.
Oman's growth forecast is in line with that of the IMF, which estimates its GDP will accelerate by 3.1 per cent in 2018, compared with 2.5 per cent expansion in 2017.
The IMF is also projecting a fiscal deficit of 11.4 per cent of GDP for 2018, versus an estimated shortfall of 13 per cent of GDP for 2017.
Oman joins the list of Gulf monarchies such as Saudi Arabia and Dubai that have also unveiled expansionary budgets for 2018, their biggest ever, as they seek to propel growth.
Saudi Arabia, the Arab world's biggest economy, approved a budget of 926bn riyals (Dh906bn), with a deficit forecast of 195bn riyals or 7.3 per cent of the GDP, compared with a shortfall of 230bn riyals (8.9 per cent of GDP) in 2017. Dubai's expenditure will surge 19.5 per cent to Dh56.56bn in 2018 as the emirate ramps up infrastructure spending to finance Expo 2020-related projects.
Oman plans to finance 84 per cent of its 2018 fiscal deficit or 2.5bn rials through domestic and foreign borrowings and the remainder of 500m rials via drawdowns of reserves.
The sultanate plans to privatise six companies in 2018 to help lift non-oil revenues and increase the private sector participation in the overall economy, the ministry said without naming the companies. The private sector’s participation in investment programmes has increase to 60 per cent in 2017 from 52 per cent in 2014, the ministry added.
The lion’s share of spending or 3.88bn rials will go to the education, health, housing and welfare sectors, while 3.3bn rials will be earmarked for public sector wages and benefits, it said.