27/05/2015 01:04 AST
The Sultanate’s non-oil sector is expected to remain healthy over the next two years with a growth of around 6 per cent. The growth will be primarily driven by its ambition to develop the country’s logistics and tourism sectors and reduce dependence on hydrocarbon revenues.
The real GDP is expected to grow by 4 per cent in 2015 and 3.7 per cent in 2016 thanks to a strong non-oil performance.
“With lower oil prices highlighting the need to diversify the economy, authorities are keen to go ahead with their ambitious projects pipeline. As a result, project spending is expected to remain at high levels, which is seen supporting non-oil growth in the near term”, says a report by National Bank of Kuwait (NBK).
In the beginning of the current year, global rating agency Standard & Poor’s projected Oman’s real GDP growth at 3.2 per cent and 3.4 per cent in 2015 and 2016, respectively. The agency estimated the nominal GDP is projected at $75 billion and $82 billion in 2015 and 2016, respectively, while real per capita GDP is estimated at $18,231 and $19,124 for these two years, respectively.
According to figures released by the National Centre for Statistics and Information (NCSI), Oman’s non-oil exports recorded a significant 8.4 per cent growth in 2014 reaching RO 4.12 billion, as against RO 3.8 billion in the year before.
The United Arab Emirates was the major buyer of Omani non-oil products at RO 776 million, posting a growth of 17.9 per cent over the previous year.
Pakistan was the second leading importer of Oman’s non-oil products, which is following by Saudi Arabia, India and the United States of America.
Pakistan’s imports of non-oil products from Oman shot up by 65.7 per cent, while Saudi Arabia and India showed a decline of 19.5 per cent and 7.7 per cent, respectively.
The NBK Economic Update report expects that resident private credit activity will continue to benefit from Oman’s healthy non-oil outlook.
According to the report, private credit to the non-financial sector grew by 12.5 per cent in 2014, driven by lending to construction and manufacturing, while personal loans increased by 9.5 per cent.
As a result, private credit growth kept a strong pace in 2014, averaging 9.5 per cent. This pace has been maintained through February 2015, as it is expected to do throughout 2015 supported by robust economic activity.
With oil prices at current levels, authorities have sought to soften the impact by bolstering oil and gas output through a focus on development. As a first step, the cap imposed on oil output was scrapped and upstream hydrocarbon development prioritised.
Output in the oil and gas sector is expected to pick up slightly over the next two years, averaging growth of 0.8 per cent. Crude oil production averaged 943,000 barrels per day in 2014, up a mere 0.2 per cent year-on-year.
The government is targeting crude and condensate output of 980,000 b/d in 2015, in an effort to offset lower oil prices. Most of the boost in output will be dependent on Petroleum Development Oman (PDO), the state’s largest producer, responsible for 69 per cent of average daily production.
Still, the NBK report says that the country may witness sizeable fiscal deficit this year and the next due to recent sharp decline in oil prices.
Although the spending is slightly less than 2014, it is still in line with past expenditures and reaffirms the government’s commitment to implementing its stated development plans.
“Despite this, we expect Oman to avoid deep cuts in spending in the near term, choosing to maintain a supportive fiscal stance. We think that the government can comfortably finance deficits in the near term thanks to its sovereign wealth fund, strong credit standing, and low debt levels”, the report says.
Oman Daily Observer
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