Riding the wave of high oil and natural gas prices, the Omani economy continued its vigorous growth and maintained its high growth profile in 2007. Oman recorded a real GDP growth of 5.7 percent in 2006 and has attracted interests among foreign investments and foreign and private investors in the local market simultaneously. In the latest study on “Oman Economic & Strategic Outlook” by Kuwait-based Global Investment House (GIH), a copy of which was sent to the Saudi Gazette, it said during the second year of the plan period 2006-2010, the Omani economy registered a year-on-year growth of 13.1 percent in its nominal GDP reaching RO15.5 billion in 2007. The structural reforms “have started showing the results in the last couple of years. Omani economy posted budgetary surpluses and the modest population growth with an expansionary economy resulted in a CAGR of 13.7 percent in per capita income during 2002-07,” it said. The per capita income almost doubled from $7,998 in 2002 to $15,180 in 2007. The resultant fiscal stability has earned the Sultanate an “A” rating by S&P with an outlook “Stable” in Jan. 2007 and an “A2” rating with a stable outlook from Moody's in July 2007. “The sultanate's efforts to diversify the economy away from the major source of revenue which is oil are bearing fruit in the current plan period. For the Oman economy, increased gas supplies are an essential component of the government's strategy to diversify and industrialize the economy through downstream oil and gas industries such as petrochemicals. Also additional gas supplies are needed to fire power and desalination plants as well as to allow Oman's LNG projects to run at capacity, while providing sufficient gas for Petroleum Development Oman (PDO) to pursue its gas-intensive enhanced oil recovery program and it is being realized through natural gas which is playing a pivotal role in diversification.” On the investment front, projects that are attracting major investments to the tune of $10 billion to $12 billion in the form of “The Wave”, “Blue City”, “Yitti” and “Muscat Golf & Country club” are driving the demand. Also, the privatization program was on track in 2007 with regard to the electricity and water sectors, where restructuring will facilitate investment by the private sector. As part of its diversification plans, the Omani government has considered tourism as another means to achieve their objective. It was keen on developing the tourism sector, which in 2007 is estimated to have contributed only 1 percent of GDP, but has a greater potential to develop. The current development plan had allocated funds for tourist projects which were expected to be completed in 2008. Though the total annual oil production declined by 3.7 percent in 2007 to reach 259 million barrels, the government has allocated $10 billion to retrieve more oil from the existing wells using enhanced oil recovery techniques aimed at increasing the production from the current approximately 710,000bpd to 1 million bpd by 2012. “To maintain the increasing infrastructure requirements arising out of more than 5 percent annual real GDP growth rate, the government has held the forte for major capital projects and encouraging private participation as well,” the study said. Oman's strategy currently is not to delink the Omani riyal from the US dollar peg. It has also decided that it would not join the GCC single currency in 2010. Despite the rocketing oil prices that sent the economy in a surplus in 2007, however the peg of Omani riyal against the US dollar fuelled the inflation considerably. Also increased money supply, rentals and increasing prices of imported articles further added up to the inflationary pressures. According to the Ministry of National Economy, Oman's annual inflation in February this year reached 11.1 percent, up from 8.3 percent in December 2007. Major rises were in food, beverages and tobacco and rents that rose 19.6 percent and 14.1 percent respectively last February. Moreover, the Omani banking sector was hardly affected by US credit meltdown that surfaced in mid-2007. The broad money (M2) comprising of narrow money and quasi money increased by 37 percent in 2007 to reach RO6,111.4 million from 4,461.3 million recorded in 2006. Within the broad money, the narrow money (M1) representing the aggregate currency with public and demand deposits in RO increased 55.9 percent in 2007 to reach RO1,916.9 million from RO1,229.6 million recorded in the previous year. The total lending during 2007 was up by 38.5 percent to reach RO6.51 billion from RO4.7 billion in 2006. Nonetheless, the superior overall economic performance as reflected in the bourses indicated increased liquidity and participation in the market as a result of higher profitability of the listed entities, the Global Investment House study said. The Muscat Securities Market clocked a value of 9035.5 points at the end of 2007, up by 62 percent from 5,581.6 in 2006. The MSM-30 index closed at 10,102.6 points in end-March this year, representing a year to date growth of 11.8 percent. “This was the highest growth registered among the markets in the GCC region during the same period,” the study said. GIH noted that the ongoing government policies and set of reforms “should attract higher foreign participation in the diversification projects” that would send the economy to scale new heights. __
