Many of the recently released growth indexes and economic reports give mixed results for the Omani economy. Yet, determined efforts on the part of Omani authorities to streamline expenditures should enhance the country’s performance.
Oman is ranked 59th among 159 economies on the 2016 index of Economic Freedom of the World. The same report gives the UAE, Qatar and Bahrain rankings of five, 12 and 26, respectively. Oman’s standing is ahead of Kuwait and Saudi Arabia.
The study relies on some 42 variables including subsidies, property rights, inflationary threats, capital control and minimum wage. The environment of low oil prices is allowing for the near absence of inflation in Oman, hovering now at below 3 per cent. Also, work is underway to cut down on subsidies and benefits.
Another study, the 2016-17 Global Competitiveness Index grants an unfavourable ranking for the sultanate among Gulf countries, with a ranking of 66th internationally and the lowest by a GCC state.
Some 138 economies are reviewed in the study, in turn published by the World Economic Forum. The index ranks on the basis of macroeconomic stability, market size, infrastructure, and technological readiness. Market size is not in favour of Oman, as the country ranks the smallest in the GCC, only ahead of Bahrain.
Still, there are positive developments in other economic aspects like the petroleum sector. Oil production has been rising steadily from 777,000 barrels per day in 2005 to 865,000 bpd in 2010 and 950,000 bpd in 2015. This translates into the sultanate accounting for 1.1 per cent of the world’s total and a notable share as the country is not recognised to be a major oil producer. By comparison, Saudi Arabia accounts for 13 per cent of global production, a level shared by the US. Russia emerges third with 12.4 per cent.
The sultanate willingly decided not to join Opec reflecting a tradition of maintaining freedom in economic choices. Bahrain is the only other GCC state that is not an Opec member, ostensibly reflecting its limited production level.
Oman controls 1 per cent of global production of natural gas. Qatar leads the GCC with 5.1 per cent of the global share, while the US and Russia account for 22 per cent and 16.1 per cent.
Oman needs to deal with budgetary shortage in the ongoing challenge of low oil prices. Fiscal year 2015 ended with a deficit of $12 billion up from a projected figure of $6.6 billion. This is sizeable, representing around 15 per cent of GDP and 80 per cent above the budgeted shortfall.
This kind of deficit is not sustainable. In 2015, the deficit was covered by drawing from international reserves and borrowing from local sources, to the tune of 47 and 53 per cent, respectively.
A forecast calls for a shortage of $8.6 billion in fiscal 2016 or 13 per cent of GDP. This requires a revisiting of the subsidy programmes and expenses where possible.
The government has disclosed plans to cut subsidies by nearly two-thirds this year though this seems difficult to achieve at this moment. Notably, subsidies for utility, housing loans, fuel and other goods stand at 400 million Omani riyals ($1 billion).
Omani officials are clearly aware of the sort of economic challenges — and opportunities — the sultanate faces.