Budget outperforms expectations after oil price recovers
Oman recorded a budget deficit of OR22.1m ($57.4m) in 2009, substantially lower than the OR810m projected, according to central bank data. Revenues fell 16.3 per cent to OR6.687bn in 2009, but this was still higher than the OR5.614bn forecast.
Its performance was largely boosted by the recovery in oil prices and the fact that, as a non-OPEC member, it was not obliged to join the group’s output cuts in 2009.
“The budget deficit was helped by the fact that the oil price averaged $62 a barrel in 2009 versus the forecast of $45 a barrel, as well as increased oil production, with Oman’s investment in the hydrocarbons sector continuing to show a positive outcome,” says Margaret Purcell, chief economist at Bank Muscat.
Oman has budgeted a deficit of OR800m for 2010, based on a conservative estimate of $50 a barrel. Crude traded at about $79 a barrel on international markets this week.
“There might well be an increase in expenditure this year if there is higher than forecast revenues,” says Purcell.
“However, I think even if this is the case, barring a dramatic and at this stage, unexpected fall in the oil price, the budget deficit might well be smaller than predicted.”
Expenditures rose 4.8 per cent year-on-year to OR6.709bn in 2009, and above the OR6.424bn planned, as a result of increased infrastructure spending.
Oman has boosted expenditure by 12 per cent in 2010 to help finance a range of infrastructure projects.
“The expenditure on infrastructure remains a priority for the government in developing the country for the long-term,” says Purcell.
Oman is expected to book a fiscal surplus of 4 per cent of gross domestic product (GDP) in 2010, after an estimated deficit of 2 per cent of GDP in 2009.
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