Public sector investments to maintain non-hydrocarbon growth
MUSCAT -- Oman's service sector is occupying the second position of dominance after the hydrocarbon sector as far as the composition of the country's GDP is concerned.
With a share of 39.7 per cent in total real GDP, the sector witnessed a growth of 7.4 per cent during 2012 as compared to 7.7 per cent during 2011.
"It is important to harness the close association of services sector with other sectors of the economy to achieve higher growth", says the Central Bank of Oman in its annual report.
The International Monetary Fund recently estimated that Oman's real non-hydrocarbon sector has grown by 5.5 per cent in 2013 and is projected to remain so in 2014.
Fiscal and external sectors are estimated to have posted surpluses in 2013 at over 5.5 per cent and around 10 per cent of GDP, respectively.
"The public investment programme is expected to help maintain the Sultanate's non-hydrocarbon growth at around 5 per cent over the medium term", says the IMF.
The major activities within the service sector which grew included wholesale and retail trade at 4 per cent, hotels and restaurants 8.9 per cent, transport and communication 7 per cent, public administration and defence 15.9 per cent, financial intermediaries 8.6 per cent and real estate services 5.7 per cent.
According to the Central Bank report, "Increased expenditure on public administration and defence, social expenditure on education and health and infrastructure building had a positive impact on the services growth in the recent period".
The share of services sector increased from 34.9 per cent during 2012 to 37.3 per cent during 2013. In terms of growth, the sector posted a growth of 10 per cent during 2013 as against 15.1 per cent in the previous year.
Wholesale and retail trade with a share of 8.4 per cent in the overall real GDP and 21.2 per cent of the services sector performed very well with a growth rate of 13.0 per cent during 2012 as compared to 7.5 per cent in 2011.
"Apart from providing inputs, services sector have greasing impact on other sectors of the economy and contribute to the outward shift in the production frontier of the industrial sector by enhancing productivity growth", the apex bank says.
On the other hand, services sector growth could be sustained provided adequate demand impulses are generated in industry or agriculture.
"Services growth momentum can be sustained by exploiting new opportunities in international trade in services, particularly, in the area of communication and information services, technology transfer and software", reveals the report.
Towards this direction, the current Eighth Five-Year Development Plan emphasizes the development of software and tourism industries, among others, through improving the institutional frameworks, encouraging investment, provision of qualified cadre and encouraging scientific research in these areas.
The Plan has been laying special emphasis on promoting opportunities of sustainable tourism development by allotting lands, encouraging investments in hotels, developing integrated tourism complexes and parks in various parts of the country.
GDP at constant prices is considered as the appropriate indicator of growth analysis around the world.
However, in case of oil exporting countries like Oman, petroleum sector has large contribution to GDP and therefore, high international prices of petroleum products add real purchasing power to a significant part of the nominal GDP. Hence, both nominal and real GDP data are used for macroeconomic analysis in such countries.
Moreover, national income accounts data for Oman, both at current and constant prices, are based on market prices, not at factor cost. As import taxes are negligible in Oman, annual growth rate of GDP at factor cost and market prices would be more or less similar.
The base year of Oman's GDP at constant prices has been brought forward to 2010 as against the base year of 2000 earlier. Based on the new series of GDP at constant prices data, the real GDP of Oman witnessed a positive growth of 5.8 per cent in 2012 for which the latest data is available.
The real GDP originating from the hydrocarbon sector registered a growth of 3.8 per cent in 2012, mainly due to sustained increase in crude oil production.
During the 5 year period 2008 to 2012, the average growth in the hydrocarbon sector was 5.1 per cent. On an average, the share of hydrocarbon sector in real GDP stood at around 46 per cent during the 5 year period 2008 to 2012.
The share of hydrocarbon sector in real GDP has almost remained constant since 2008 at around this level.
Real GDP emanating from the non-hydrocarbon sector grew by 6.9 per cent in 2012 over and above a growth rate of 6.1 per cent in the previous year.
The average growth in the non-hydrocarbon sector during 2008 to 2012 was 6.8 per cent. This augurs well for the diversification process in the Sultanate as the Government is pushing for development of industrial and services activities and creating more jobs in these sectors.
There has also been some increase in the share of non-hydrocarbon sector in the real GDP over the five year period from 2008. The services sector with a share of around 40 per cent in the overall real GDP during 2012 closely followed the hydrocarbon sector which had a major share of around 46 per cent in the real GDP.
© Oman Daily Observer 2014
