The fallout of the oil price slump does not mean Oman’s economy is heading for hard times or that the country is edging closer towards bankruptcy.
There are already strong signs of the government embarking on a serious drive to correct fiscal drawbacks and fix structural cracks. It is halting all low-key projects and tightening financial loose ends without compromising on essential infrastructure, which is the key to expansion.
All the developments in the backbone of the economy are intact, which includes the energy sector, thanks to an alternative streamlining of new financing. Am administrative reshuffle will follow suit that would lead to waste cuts in the civil service and state-owned organisations.
Oil prices are currently hovering higher at around $50 mark per barrel, fetching Oman an extra OMR3.7 billion since the beginning of the year. The small windfall is enough to wipe off the deficit of OMR3.3 billion for the entire year as forecast in the 2016 budget. There is all this evidence, including the measures that are being adopted currently, which are expected to ultimately stimulate economic growth and are therefore good for the Sultanate.
This can be backed up by hard facts, too. It has been more than two years since oil prices took a dive, from $115 per barrel in July 2014 to less than half now. Since then there have been no signs of the economy cracking up.
There is no slowdown in retail growth, either. Money supply rose by 5.4 per cent in June this year to OMR15.6 billion, up from OMR14.8 billion in the same period last year, according to the Central Bank of Oman’s statistics. The healthy money supply growth is proof that the rate of consumerism is still trending upwards, despite the hard times predicted by many.
The banking sector still calls the shots in the private sector. Total deposits in financial institutions registered a modest growth of 1.8 per cent to OMR20.1 billion in June this year, compared with the same month in 2015. This is encouraging and a good sign that all is well in the retail sector, which is the backbone of any economy.
The private sector is also making corrections of its own without resorting to extreme measures. It is employing more workers contrary to the general belief. Oman is the only country in the Gulf Cooperation Council (GCC), which still creates employment at a time many of its partners are cutting down on recruitment. During the same month of June 2016, the rate of job creation showed no signs of slowing down.
The official statistics showed that there was 0.6 per cent job growth for Omanis and 0.9 per cent for expatriates. This means that the sector is preparing to become less dependent on lavish government’s contracts that entrepreneurs enjoyed in the last four decades and half.
For so many years, the government has encouraged growth in the non-oil sectors. The statistics prove that even during the height of severe austerity, it is beginning to happen in a modest, but enviable way. Cuts in government subsidies are forcing the private sector to rely on its own resources. Directors of private companies now know they can no longer fall back on the safety net that once cushioned their fall.
The cooling off of oil prices reflects the new economic strategy of business diversity in the last two years. Growth rates of 35 per cent in new businesses have been registered in different parts of the country. It is clearly evident that people are now making adjustments by creating self-employment rather than standing in the job queue.
No one can deny that there are no signs of economic fragility. However, there are strong indications that the road to recovery is clear and that the private sector is embarking on it.
The private sector is already taking the challenge of shouldering the responsibility of keeping the country in good economic shape without relying much on the government’s aid.