MUSCAT: The economic climate has been relatively challenging for the coastal state in the Arabian Peninsula. The rough global macroeconomic landscape, coupled with continuous depressed oil prices, have started to take a toll on this hydrocarbon-reliant economy-and it is not expected to ease off anytime soon.
As oil prices are only expected to recover in the medium-term, Oman’s economic growth prospects are expected to slow down. With lower financial reserves compared to its regional counterparts, Oman, along with Saudi Arabia and Bahrain (all of which share the same concerns), are the most vulnerable in the GCC market. Finding ways to close the budget gap, market observers expect the country to come to the market to issue debt, amidst rumours of it requiring external funding.
The IMF expects the country to chart a fiscal shortfall of 18 and 20 per cent of gross domestic product (GDP) for 2015 and 2016, respectively. On the external front, Oman’s current account deficit is anticipated to widen to 17 per cent in 2015 and 24 per cent in 2016.
Assuming that the twin deficits are funded by foreign exchange and fiscal reserves, collectively estimated at about 70 per cent of GDP as at end-2014, the nation’s reserves are expected to dwindle rapidly. The government debt level was still low at about five per cent of GDP as at end-2014, which will allow the government some latitude to weather the low oil price environment.
