Washington: An economic growth of about 3 per cent for the Sultanate by 2019 has been forecast by the World Bank.
The Bank has said that growth rate will improve as the gradual recovery of oil prices will improve confidence and encourage private sector to invest in the Sultanate.
The World Bank Middle East and North Africa Region (MENA) Economic Monitor Report, which was published on the World Bank’s website hailed the government’s revision of its economic policies, which relies on economic diversification and controlling the public finance conditions.
According to the report, the Pro-business reforms, such as the foreign ownership law and the Foreign Direct Investment Law are expected to increase trade and investment opportunities.
The report pointed out that in January 2017 electricity subsidies were removed for industrial, commercial and government users, who collectively consume over 30 percent of the total energy supply.
Moreover, the adoption of a 5 percent value added tax (VAT) expected in 2018, higher corporate income tax and increasing excises and fees for government services are expected to narrow the fiscal deficit to 7.4 per cent in 2019.
The Bank added that current account deficit is projected to improve to 14.4 per cent in 2017 and continue to narrow as oil prices rise, non-oil exports grow.
The report also noted that inflation is expected to ease to 1.1 percent by 2019 despite the introduction of the VAT due to the stagnation in food prices and the dissipation of cost-push pressures from subsidy reform.
The report stressed the fact that the successful recovery of economic growth, necessary for securing employment opportunities, hinges on the timely implementation of diversification reforms. The massive infrastructure spending programme under the 9th five-year development plan is likely to encounter delays as the Government continues to be fiscally constrained.
“The industrialization plan is set to grow power demand which would require a prioritisation of natural gas projects. The government will look towards increasing public-private partnerships,” the report added.
“While oil and gas revenue fell by 29 percent in 2016, non-hydrocarbon revenue is estimated to have increased by 20 percent due to higher customs and investment income,” the report concluded.