Tuesday 22 / April / 2025
Muscat: Oman will get a boost in its future non-oil revenue with the introduction of value added tax, which is expected next year. Also, better enforcement of existing corporate taxes and import duties is an area where improvements are possible, said an economist.
“In the longer run, as the diversification away from the oil sector proceeds, the share of the non-oil revenues in the government budget will in all likelihood tend to increase, probably in the form of consumption taxes and maybe co-payments for certain public services,” said Fabio Scacciavillani, chief economist at the Oman Investment Fund.
Referring to the recent recovery in crude oil prices, he said the Sultanate’s budget this year is based on an average oil price of $45 per barrel. “In the last quarter of 2016, (according to the latest bulletin of the Central Bank of Oman) oil export was about 80 million barrel. So assuming that the oil price hovers around $53 per barrel, the additional benefit for the public coffer is estimated at roughly OMR250 million per quarter.”
Considering that the government’s oil revenues in the second quarter of 2017 were in the order of OMR1.2 billion, it is a notable improvement.
With the recovery in the global economy gaining momentum, and the regional economy benefitting from the rebound in oil prices the outlook is decisively positive.
Scacciavillani further said Oman remains attractive for foreign investors despite the low oil price. According to the Oman Statistical Yearbook, with the exception of 2015 (when it was recorded an outflow of OMR835 billion), since 2004, FDI in Oman has increased by roughly half a billion rial. In 2016, the flow was OMR649 million, the highest figure since 2009. In 2016, the total stock of FDI in the Sultanate reached $18.5 billion, according to the Investment Report 2017 of the United Nations Conference for Trade and Development (Unctad) in line with the average of three years before the 2008 Great Recession.
“In my view, there exists a wide margin of improvement if all stakeholders join in an effort to promote Oman on the international scene,” added Scacciavillani.
He said depending on foreign markets for debt has a two-fold advantage. “It avoids a drastic credit crunch and a sharp rise in interest rates for the private sector, thereby sustaining a major driver of growth.” Also, it demonstrates the confidence of global investors in the prospects of the Omani economy and therefore it sends a positive signal for households and enterprises reducing uncertainty to a great extent.
Talking about inflation, he said annual inflation was pushed up in 2016 by the reduction of the fuel subsidies, but essentially, it was a moderate temporary effect that is gradually ebbing.
“In fact, after reaching 2.8 per cent last March, inflation declined sharply to 0.7 per cent in July and is now slightly above 1.5 per cent, a rate perfectly in line with those of major developed economies, in particular Euro-led economies or the United States.”
