(MENAFN- Muscat Daily) Muscat- Oman's economy is expected to grow by 3.5 per cent in 2018 driven by a gas production rebound, according to the Institute of International Finance (IIF). Oman's government aims to achieve a minimum three per cent real GDP growth this year, which is expected to be driven by recovery in oil prices and efforts to diversify the economy and improve investment climate.
'We expect growth to pick up from 0.4 per cent in 2017 to 3.5 per cent in 2018, driven by a gas production rebound,' the IIF said in its economic report on Oman. The Washington, US-based IIF projects Oman's hydrocarbon GDP to expand by 3.6 per cent, while non-hydrocarbon GDP to grow 3.5 per cent. 'Infrastructure projects, including new airport, roads, hospitals and Port of Duqm, will add momentum to non-hydrocarbon growth,' it said.
The IIF said hydrocarbon sector contracted in 2017 due to oil and gas production declines but the rebound in gas production this year is driven by Khazzan gas field. It said Oman's 2018 budget maintains high spending to boost economic growth.
'While fiscal consolidation easing may improve growth prospects in the short-term, such a policy would lead to higher public debt and interest rates and more pressure on the exchange rate peg with adverse effects on growth in the medium-term.'
The IIF expects Oman's fiscal deficit to narrow further to 9.3 per cent of GDP in 2018, based on its average Brent oil price assumptions of US$60 per barrel. It estimates government's revenue to increase 11 per cent this year due to higher oil prices, higher gas export volume, and improvement in non-hydrocarbon revenue collection. 'We expect capital expenditure to remain high, around ten per cent of GDP, to support the completion of infrastructure projects under the current five-year development plan (2016-2020),' the IIF said.
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