Oman has reported a healthy first quarter but remains cautiously optimistic about its 2012 outlook.
“The overall outlook for Oman remains positive in 2012 despite heightened downside risks to global recovery”, said Central Bank of Oman in its annual report.
Despite the global economic turmoil, the bank said Oman was able to sustain the continued growth experienced in 2011, in this year’s first quarter also.
“The growth momentum witnessed in 2011 appears to have sustained in the first quarter of 2012 notwithstanding deteriorating global macroeconomic conditions, arising mainly due to the sovereign debt crisis in Europe,” it said.
According to an International Monetary Fund estimate, Oman’s real GDP grew 5.5% in 2011.
Oil and gas account for about half of Oman’s GDP. The central bank cautioned that country’s growth could be adversely affected if oil prices fall.
However, the Omani hydrocarbon sector proved an important contributor to growth last year with oil production rising to 885,000 barrels per day (bpd) from 865,000 bpd in 2010. Moreover, Oman’s average oil export price rose to $103 per barrel from $77 per barrel in 2010, bolstering government foreign currency revenues significantly.
Omani finance ministry official last week announced higher than expected oil prices will help reduce OR1.2bn ($3.1bn) budget deficit projected for 2012. The country also posted a 1.5 billion rial ($3.8 billion) budget surplus for the Jan-Apr period of this year thanks to a surge in oil revenues. Inflation also dropped to 3% in April, the Gulf country’s economy ministry data showed last month.
Muscat has been benefitting from a strong oil windfall in 2011 which helped bolster the government’s financial buffer. Fiscal surplus hit 7% in 2011 which includes oil revenues from various investment and savings funds and the government’s investment income. The 50% increase in the government’s revenues from hydrocarbon was more than sufficient to offset a 44% increase in current public spending. This increase included higher outlays for wages and social and employment benefits in line with the measures taken last year.