Oman has endorsed a new five-year development plan that aims to achieve real GDP growth of three percent annually and keep inflation under control following a sharp rise during the pre-crisis oil boom period.
The plan is one of the largest ever development schemes launched by Oman targeting massive investments and intensification of plans to diversity its oil-reliant economy. The plan will also pursue diversification efforts and a drive to expand the country’s oil and gas production and increase hydrocarbon reserves.
The Sultan also endorsed the 2011 budget, which forecast spending at a record high RO8.13 billion and revenue at RO7.28 billion, leaving a deficit of RO850 million, nearly four percent of the estimated GDP.
Local press, citing a government statement said the 2011 budget was nearly nine percent higher than the 2010 budget, adding that this year’s budget is based on a record high oil price of $58 a barrel. Oman’s oil production soared to a nine-year high last month to around 875,000 barrels per day while crude prices in the first half of 2010 were more than 30 per cent higher than their average in the first half of 2009. Oil and gas revenue constitutes 81 per cent of total revenue.
In statements last month, Oman’s Minister of National Economy Ahmed bin Abdul Nabi Mecki said real GDP growth in the country’s seventh development plan for 2006-2010 sharply exceeded the targeted rate of three per cent despite the adverse effects of the 2008 global fiscal distress.
Recent government figures showed real GDP growth stood at 5.5 per cent in 2006, around 6.8 percent in 2007, as high as 12.8 percent in 2008 and nearly 7.3 percent in 2009. Growth forecast in 2010 stands at around 6.1 percent.
January 2, 2011
Analysis and Forecast: Decreasing Risk
This is the eighth development plan issued by the Omani government with the overall aim of diversifying the economy as well controlling inflation and maximizing growth.
The rise in oil prices in 2010, well above the average oil price accounted for in the state budget calculations has meant that Oman’s GDP jumped by almost 34% in 2010. This is in addition to higher oil production. The 2011 budget continues to use conservative oil price estimates and therefore revenue is also expected to exceed predictions this year. All this contributes to making the realization of the new development plan highly possible.
The five year plan and the budget, coupled with favourable oil prices and increased production all point to greater reassurance that Oman’s long-term diversification plans are achievable.
The figure below shows the approximate make-up of the GDP and the long-term plans as in Vision 2020.