Sultanate rebalances but continues search for growth

16 December 2018
Muscat grapples with the twin challenges of narrow revenue streams and insufficient job opportunities for its rapidly growing youth

After a rocky 2017 that saw GDP in Oman shrink by 0.9 per cent, the recovery of oil prices in 2018 has returned the sultanate to growth, while the introduction of VAT in January 2019 is expected to increase GDP by 5 per cent, though VAT-driven consumer price inflation will factor into the equation.

The rollout of VAT is nevertheless timely given the overreliance of Oman’s budget on hydrocarbon reserves. However, it will also represent just one part of the puzzle if Muscat is to balance its books long-term.

Youth unemployment

A pressing concern in the sultanate is the persisting high rate of joblessness among nationals. Omanisation measures, including local employment quotas for the private sector and visa bans on jobs in certain sectors, have shrunk the expatriate population, but created far fewer local jobs than expected.

One problem, according to the Ministry of Manpower, is that Omanis strongly prefer to work in the public sector, so the private sector is facing both erratic labour legislation and indisposition among locals towards non-government jobs.

Strategic improvements

Where Oman is having more success is in the rationalisation of its previously nebulous sprawl of state-run companies. The merger of Oman Oil Company and Oman Oil Refineries & Petroleum Industries Company in November could yield $3bn in long-term savings. In banking, the parallel merger of two pairs of local banks is also expected to deliver performance improvements.

In logistics, following the establishment of Asyad in 2016, the creation of Oman Aviation Group in February has unified the country’s aviation-linked companies. The efforts bode well for Oman’s infrastructure strategy, which has also created 54,000 jobs for young Omanis over the past four years.

There are therefore plenty of developments within Oman that hold promise for growth beyond oil receipts, and assuming youth unemployment can be addressed, the outlook for future positive developments looks optimistic.

Oman special report

Government: Succession looms in Oman amid geopolitical riptides

Economy: Oman’s uncertain economic recovery continues in 2019

Banking: Oman banks look to mergers and project financing

Oil: Oman chases energy integration benefits

Transport: Oman’s logistics programme comes together

Power and water: Muscat launches drive for energy diversification

Data bank: December 2018

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