Growth in the Sultanate is expected to recover over the medium-term as pro-business reforms and oil prices rebound pay off, according to the World Bank’s first edition of the Gulf Economic Monitor.
Across the region, modest growth is projects with increased activity in the non-oil sector
In the Sultanate while real GDP growth is under owing to the agreement reached with Organisation of Petroleum Exporting Countries to cut oil production into the first quarter of 2018, it is expected to recover gradually reaching around 3 per cent by 2019. The recovery of oil prices improves confidence and encourages investment, the report said. Pro-business reforms such as the foreign ownership law and the foreign direct investment law and the lifting of sanctions on Iran are expected to increase trade and investment opportunities, the report says.
The World Bank report takes note of the Tanfeedh initiative and spearheading diversification away from hydrocarbons.
“This is expected to lead to a significant improvement in the business environment of the country in the medium-term,” the report says. Diversification and expansion of fiscal revenue sources aim to create more jobs for youth.
Fiscal consolidation is expected to continue in 2017. Starting in 2018, the value added tax, higher corporate income tax and increasing excises and fees for government services are expected to narrow the fiscal deficit.
Countries have also attempted to increase non-oil revenues and Oman raised corporate income tax rate. Regional apex banks, particularly the Central Bank of Oman, have revised reserve requirements leaving more money in the hands of banks. While the region has seen a slowdown in credit growth, the Sultanate’s credit to the private sector is still growing.
Infrastructure investment is expected to be a key support to growth in Oman, Qatar and Kuwait.