Rising pressure on Oman's economy.
Centre for Statistics and Information (NCSI), have done little to inspire the confidence of either the
IMF or the general investment community.
Net revenue gained from oil & gas sales in the Arabian Peninsula sultanate fell 46.3 per cent in just
5 months during the first half of the year, from 3.4 billion Omani Riyals (US$ 11.3 billion) to 2.33
billion Omani Riyals (US$ 6 billion)
Obviously the drop in income has impacted the sultanate's budget equilibrium, which evidenced an
alarming swing into deficit of 1.92 billion Omani Riyals (US$ 4.99 billion) by the end of June
2015, down from a surplus of $250 million at the same point in the previous year.
Oman's budget for 2015 committed to government expenditure of 14.1 billion Omani Riyals
(US$ 36.6 billion), and did contain a built-in deficit estimate of 2.5 billion Omani Riyals
(US$ 6.49 billion). But therein lies the conundrum, for the original budgetary calculations are based
on an average oil price of US$ 75 a barrel. Meanwhile, analysts forecast that an oil glut, compounded
by Iranian oil returning to the market, coupled with falling demand will continue to drive prices
down to potentially less than half that base figure in the medium term.
This key factor places the sultanate's budget plans under intense pressure, given that the country
does not possess the substantial fiscal and oil & gas reserves enjoyed by its wealthier Arabian Gulf
neighbours. In fact they too might start to feel a degree of fiscal strain.
Back in April, the World Bank estimated that the decline in crude prices could well cost the Gulf
Cooperation Council (GCC) member states Au Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United
Arab Emirates (UAE) around US$ 215 billion, or the equivalent of 14 per cent of their combined gross
domestic product, in 2015. The institution's conclusion was that the region as a whole was looking
at a possible fiscal deficit for the first time in four years.
Nevertheless, it is not all doom and gloom, as at least one part of Oman's economic mix, the property
sector, appears to have exhibited decent growth over the first-half. The sultanate also has as a long
history as a holiday destination both for Gulf based visitors and over the past two decades a
steadily increasing flow of international tourists, which should also help. Indeed, holiday homes may be
pushed increasingly to the fore as a pillar of the economy.
The total traded value of Omani real estate transactions hit 1.9 billion Omani Riyals
(US$ 4.9 billion) in H1 2015, an increase of 52.6 per cent compared with1.2 billion Omani Riyals
(US$ 3.1 billion) recorded over the same period of 2014.
One more related and encouraging morsel of economic data published by the Oman News Agency indicated
that the number of foreign investors in local real estate was rising. For, while the number of
property title deeds issued by the end of H1-2015 had risen to 105,891, compared with 100,076 issued
the year before, an increase of 5.8 per cent, the number assigned to GCC citizens had
fallen. Property title deeds issued to GCC citizens totalled 1,165 by the end of May 2015 compared
with 1,704 title deeds for the same group in 2014, representing a decline of 31.6 per
Undoubtedly, there are Omani buyers in and amongst these figures, but foreign ownership
originating from beyond the Gulf would certainly appear to be on the rise, an economic formula
which has served other destinations like Dubai in the UAE very well.
Corresponding rises in the volume of H1 mortgage contracts registered over the six months to 9,383
contracts from 8,703 registered during the same period in 2014, an increase of 7.8 per cent, will
undoubtedly help the banking sector. While the fees collected from all the associated legal
transactions hit 21 million Omani Riyals (US$ 54 million) equating to an increase of 10.4 per
cent. The traded value of the sales contracts also increased 1.5 per cent to 540 million Omani Riyals
(US$ 1.4 billion).
Nevertheless, while Oman is doing everything possible to leverage its tourism and holiday real estate
potential, it is proving an uphill struggle to counterbalance the dominance of hydrocarbon revenues
with a non-oil related earnings stream of sufficient value, within its current economic
Copyright [c] Andy McTiernan. All rights reserved. Provided by SyndiGate Media Inc. ( Syndigate.info ).
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|Publication:||Andy McTiernan Property & Economy Bulletin|
|Date:||Aug 5, 2015|
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