Oman is heavily dependent on its oil resources, but since 2016, the budget deficit was reduced as Oman reduced government subsidies and is issuing debt to cover its deficit, using enhanced oil recovery techniques while simultaneously pursuing a development plan with the objective of reducing the sector’s contribution from 46% to 9% in accordance with the ninth five-year plan. The economy likely rebounded after a contraction, primarily on the back of increased prices and the fiscal deficit fell to a four-year low despite greater expenditure while international reserves climbed by over a third in 2019. Muscat has notably focused on employing the rising number of nationals but high social welfare benefits have challenged the government’s ability to balance its budget and Omani officials imposed austerity measures to diesel subsidies, with further subsidy cuts for electricity, facing some public opposition.
Oman’s economic freedom makes its economy the 88th freest in and while its overall score remained the same, with higher scores for government integrity and labor freedom, it is ranked 7th in the Middle East and its overall score is slightly below the world averages. Although we expect the monarchy to retain power, a succession to the throne is likely and the untested succession means that the budget will remain in deficit even as oil prices remain stable as a result of the increasing contribution in the economy. Oman is a country whose GDP per capita grew 339% reaching a peak in the 1970s and rising again in the 1990s and traditional souqs are very common and have formed the economy performance. The GDP is expected to increase as a boost in the hydrocarbon sector is expected to drive the recovery and the OPEC+ restrictions are lifted.
In 2019, stronger fixed investment should support overall growth although the economy faces fiscal imbalances, and panelists forecast growth of 2.5% in 2020. With businesses complaining about a cumbersome regulatory environment, the weak legal framework and other forms of favoritism continue to obstruct economic freedom of Oman, an oil-producing kingdom that is one of the least populous, ruled by Sultan Qaboos bin Said Al-Said. Oman liberalized its markets and today, oil has enabled a dramatic development of exports since it was first discovered in the western desert by the Petroleum Development Oman who began production with the Omani Government.
Located in the south-eastern quarter of the Arabian Peninsula, leveraging its strategic location, Oman is becoming a global logistics centre, as diversification efforts are a driving force of the long-term strategy which emphasizes privatization in logistics, mining and fisheries as potential future economic drivers. As part of the Sultan’s efforts to allow greater citizen participation in governance, Oman joined the World Trade Organization and is heavily dependent on its oil resources, but tourism and manufacturing industries are key components of the diversification strategy. From 1981 to 1986, Oman increased its production levels but with the collapse of prices, however, production was cut back in coordination with the OPEC by mid-1987,when it climbed to more than 900,000 b/d.