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Investment spending in Oman will be a key driver of real GDP growth which, having seen growth levels reach 3% in 2021 and 2% in 1Q22, is projected by the government to reach 5% in 2022, implying an expectation of much stronger growth in the remaining quarters, the Bahrain based investment bank SICO said in a note.
However, as the banking sector showed a mere 1.2% year-to-date (YTD) growth in loans and lending to the private sector showed marginal growth of 0.2% as at 1H22, the pace of recovery remains slower than projected, the report said.
The official outlook for 2022 of real GDP growth "reaching 5% is optimistic, yet more likely achievable over the 2022-2023 period," said Sumaya Aljazeeri, SICO's Assistant Vice President.
Earlier this month, IMF said Oman is projected Oman to grow at 4.3% in 2022, supported by higher oil prices and the fiscal consolidation under the government's Medium-Term Fiscal Plan (MTFP). The overall central government balance improved by 12.8 basis points of GDP to a deficit of 3.2% in 2021.
SICO said fiscal spending in Oman has pivoted in 2022 after a slowdown in public spending in the last three years. Capitalizing on higher oil and gas revenues, the government has increased capex allocation and is adopting proactive investment planning across sectors.
The government’s pipeline comprises multiple key projects in the services’ sector, mainly logistics, transport, and the oil and gas sector. Accordingly, development expenditure allocation for the year 2022 has increased from 900 million Omani rials ($2.33 billion) to OMR1.1 billion, thanks to a positive fiscal balance in H1-2022.
Oman Investment Authority (OIA) also plans to list some state-owned entities on the Muscat Securities Exchange and attract OMR 11 billion in investment opportunities, "which reflected increased proactivity in focusing on investments, FDI, and capital market development."
Nonetheless, the rate at which the economy picks up and investment spending becomes reflected in projects on the ground will set the momentum of growth for Oman and show sincerity to foreign investors, the report added.
(Reporting by Brinda Darasha; editing by Daniel Luiz)
