After sharp contraction in economic activities in 2020 due to the coronavirus pandemic and lower oil prices, the sultanate’s government now expects a rebound to economic growth this year.
Oman’s economy, as per the Ministry of Economy data, is estimated to shrink by 4.3 per cent in 2020. However, the Ministry of Economy predicts the sultanate’s real GDP to grow by 2.3 per cent in 2021, according to the 2021 budget statement released by the Ministry of Finance.
As per the statement, the Ministry of Economy expects the country’s oil GDP to grow by 1.1 per cent in 2021, while non-oil GDP is likely to expand by 2.9 per cent growth rate.
The World Bank recently projected that Oman’s GDP is expected to shrink by 4 per cent in 2020, but will grow by 2 per cent in 2021, the highest percentage over the last five years. During the past three years, Oman has recorded the GDP growth rates of 0.3 per cent, 1.8 per cent and 0.5 per cent in 2017, 2018 and 2019, respectively.
On the other hand, the International Monetary Fund (IMF) in October projected that Oman’s real GDP will sharply drop by 10 per cent in 2020, and it is projected to decline again by 0.5 per cent in 2021.
‘However, the Ministry of Economy predicts the GDP to rise by 2.3 per cent in 2021. The variation in the projections is attributed to different assumptions about the oil GDP,’ the sultanate’s 2021 budget statement said. It said the world’s economic activity is anticipated to recover gradually in 2021, leading to improved global oil demand and better oil prices.
Oil prices experienced sharp declines in 2020 due to lower oil demand as a result of lockdowns and health measures taken worldwide to control the spread of the coronavirus.
The COVID-19 pandemic, in a low-oil price environment, triggered tremendous challenges for Oman’s national economy, which prompted the government to undertake various precautionary measures to contain the spread of the virus.
‘Such measures have reflected negatively on the economic activity and public finance. By the end of the second quarter of 2020, the country’s GDP experienced a decline of 13.4 per cent at current prices. This decline is driven by a reduction in the value added of oil activities by 20 per cent, registering RO4.1bn by the end of second quarter of 2020. The decline in the value added of non-oil activities was at 9.9 per cent, recording RO8.7bn,’ the budget statement said.
The Ministry of Economy estimates the GDP at current prices to stand at RO24.7bn by the end of 2020. According to the Ministry of Economy’s forecasts, the inflation rate in Oman is anticipated to decline by 0.8 per cent in 2020, but it is expected to surge by 3.8 per cent in 2021.
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