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Rising pressure on Oman's economy.

Regular newspaper reports on Oman's plummeting oil revenues, quoting bulletins issued by its National

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


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Publication:Andy McTiernan Property & Economy Bulletin
Geographic Code:7OMAN
Date:Aug 5, 2015
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