Oman’s real GDP growth will remain subdued at 1.6 per cent this year amid flat oil production and muted activity in the wider economy, Moody’s Investors Service said on Monday.
Oil production cuts agreed in OPEC+ agreement have constrained hydrocarbon production and activity in the wider economy will be suppressed by government efforts to rein in public spending in the wake of the oil price drop in 2014, Moody’s said in a report. It expects Oman’s economy to grow by 2.7 per cent in 2020.
The global ratings agency said that the growth in the hydrocarbon sector, which still contributes 36 per cent to the Omani GDP, will remain broadly stable at a low level. ‘We expect crude oil production to contract by around 1 per cent in 2019, reflecting the extension of the 2017 agreement between the members of the OPEC and a number of other major oil producers to cut production.’
But natural gas production (3.7 per cent of GDP) will continue to expand, by around 13 per cent in 2019, following a 16 per cent increase in 2018, thanks to the new BP-Khazzan gas project that came on stream in September 2017, Moody’s added.
‘We expect growth in the wider economy to remain subdued, a result of moderate oil prices which have severely eroded government revenues and led to five years of public spending constraints,’ the ratings agency added.
Following the attacks on Saudi Aramco oil production facilities in September, Moody’s still expect Brent crude prices to range between US$50 and US$70 a barrel (in the medium term), well below Oman’s estimated fiscal breakeven oil price of US$89 a barrel.
According to Moody’s, the sultanate’s economic growth will improve modestly beyond 2021. ‘Beyond 2021, we expect annual GDP growth to strengthen towards 3 per cent, helped by the completion of several major infrastructure projects. These include the large Liwa Plastics Complex, further expansion of output in the metals, mining and fisheries sectors, and ongoing developments in Duqm.’