Economic Indicators of Oman
Introduction
Oman officially called the Sultanate of Oman is an Arab state in southwest Asia on the southeast coast of the Arabian Peninsula. It is bordered by the United Arab Emirates (UAE) to the northwest, Saudi Arabia to the west and Yemen to the southwest. The coast is formed by the Arabian Sea on the southeast and the Gulf of Oman in the northeast.
Oman is an absolute monarchy in which the Sultan of Oman, named Sultan Saeed bin Qaboos, exercises ultimate authority but its parliament has some legislative and oversight powers. In November 2010, the United Nations Development Programme (UNDP) listed Oman, from among 135 countries worldwide, as the nation most-improved during the preceding 40 years. According to international indices, it is one of the most developed and stable countries in the Arab. Oman is a middle-income economy that is heavily dependent on dwindling oil resources.
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Because of declining reserves and a rapidly growing labor force, Muscat, the capital of Oman has actively pursued a development plan that focuses on diversification, industrialization, and privatization, with the objective of reducing the oil sector's contribution to GDP to 9% by 2020 and creating more jobs to employ the rising numbers of Omanis entering the workforce. Tourism and gas-based industries are key components of the government's diversification strategy.
By using enhanced oil recovery techniques, Oman succeeded in increasing oil production, giving the country more time to diversify, and the increase in global oil prices through 2011 provided the government greater financial resources to invest in non-oil sectors.
| 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | |
| Unemployment | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- |
| Inflation | - 1. 2 | -0. 8 | -0. 3 | 0. 2 | 0. 8 | 1. 9 | 3. 2 | 6. 0 | 12. 1 | 3. 9 | 3. 2 | 4. 1 | -- |
| GDP growth annual (%) | -- | -- | 2. 6 | 0. 3 | 3. 4 | 4. | 5. 5 | 6. 8 | 12. 8 | 1. 1 | 4. 0 | 5. 5 | -- |
| GDP real growth (%) | 4. 6 | 7. 4 | 2. 2 | 1. 1 | 1. 2 | 5. 6 | 6. 6 | 5. 6 | 6. 4 | 2 | 4. 2 | 5. 5 | -- |
| Reserves (billion US $) | -- | -- | 3. 173 | 3. 593 | 3. 597 | 4. 358 | 5. 014 | 9. 523 | 11. 582 | 12. 203 | 13. 025 | 14. 366 | -- |
| Tax/GDP (%) | -- | -- | -- | -- | -- | 19. 50 | 20. 30 | 21. 60 | 21. 60 | 21. 60 | 21. 60 | 22. 0 | -- |
| Trade/GDP (%) | -- | -- | 77. 4 | 82. 9 | 90. 6 | 89. 9 | 88. 8 | 96. 9 | 96. 2 | 94. 1 | -- | -- | -- |
| External Debt (billion US $) | 4. 8 | 4. 5 | 5. 3 | 5. 7 | 5. 97 | 4. 81 | 4. 36 | 4. 26 | 5. 3 | 6. 88 | 7. 06 | 8. 83 | 9. 5 |
| Saving/GDP (%) | -- | -- | 40. 2 | 39. 4 | 38. 1 | 50. 5 | 49. 0 | 47. 2 | 51. 0 | -- | -- | -- | -- |
| Real Interest Rate(%) | -- | -- | 10. 8 | 1. 0 | -2. 9 | -11. 1 | -4. 8 | 0. 6 | -16. 4 | 40. 4 | -10. 0 | -9. 7 | -- |
| Exchange rate ($) | 0. 38 | 0. 38 | 0. 38 | 0. 38 | 0. 38 | 0. 38 | 0. 38 | 0. 38 | 0. 38 | 0. 38 | 0. 38 | 0. 38 | 0. 38 |
1. Unemployment
Percent of the labor force that is without jobs Oman has a population of 2. 981 million, which is rising at around 3. 4% a year. Its labor force is just shy of 1 million. There are no up-to-date unemployment figures available for Oman. Unemployment was estimated at 15% in 2004, but it has been dropping as the ‘Omanization’ program continues to roll out and is forecasted to drop below 10% within the next five years. The policy of Omanisation aims to replace expatriate workers with locals.
2. Inflation
As measured by the consumer price index reflects the annual percentage change in the cost to the average consumer of acquiring a basket of goods and services that may be fixed or changed at specified intervals, such as yearly.
Despite high liquidity, inflation remained low in the range of -1% to 1. 9% during 2001 to 2005 but flared up to an annual rate of (12. 6%) in 2008 compared to a (5. 9%) in 2007 due to high import prices for goods priced in Euro, Japanese Yen and British Pound sterling, and the depreciation of the US Dollar against the world major currencies. Oman’s monetary policy focuses on controlling inflation, which has remained generally modest, partly reflecting the openness of the economy. The government controls the prices of many goods and services through subsidies.
Moreover, the government does not resort to monetization of its budget deficits, so there is little inflationary pressure from this source. CPI inflation came down to a manageable rate of 3. 5% in 2009 due to wise monetary and fiscal policies of the government. Omani Riyal is pegged to the US Dollar and as the USA is an important source of imports for Oman, it protects prices from some of the pressures of imported inflation from the USA. The yearly rates of consumer price inflation are expected at (3. 9%) and (2. 9%) in 2010 and 2011, respectively.
3. Gross Domestic Product
GDP is the sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products. It is calculated without making deductions for depreciation of fabricated assets or for depletion and degradation of natural resources. A surge in oil prices since 2003 has resulted in strong growth of Oman’s economy, which has grown almost two and a half times in size from 2002 to 2008. Nominal GDP grew strongly at the rate of 44% to US$60 billion in 2008 compared to US$41. billion in 2007. Nominal GDP shrank by (-10. 9%) to $53. 4 billion in 2009 due to the global financial and economic crisis and the slump in the world oil market. However, nominal GDP is likely to expand by 16. 6% and 8. 9% to US$62. 3 billion and $67. 8 billion in 2010 and 2011, respectively. In real terms, the economy grew at the rate of 3. 4% in 2009 compared to 6. 2% in 2008. The economy is expected to pick up and expand at the rate of 4. 7% each in 2010 and 2011 on the back of the expected global economic recovery and increased world oil demand.
4. Total Reserves:
Reserves comprise holdings of monetary gold, special drawing rights, reserves of IMF members held by the IMF, and holdings of foreign exchange under the control of monetary authorities. The gold component of these reserves is valued at year-end (December 31) London prices. Data are in current U. S. dollars. Since 1973 the Omani Riyal (RO) has been pegged to the US dollar. After 10. 2% devaluation in January 1986, it has remained at the level of RO: US$2. 60, which is likely to continue in the medium-term. Relatively low inflation and increasingly tight fiscal policy have helped the government maintain this peg.
Total reserves excluding gold stood at US$11. 5 billion at the end of 2008 compared to US$9. 5 billion at the end of 2007. Foreign reserves stood at US$ 11 billion in 2009, which are expected at $11. 1 billion and $11. 5 billion by the end of 2010 and 2011, respectively.
5. Tax/GDP
Tax revenue refers to compulsory transfers to the central government for public purposes. Certain compulsory transfers such as fines, penalties, and most social security contributions are excluded. Refunds and corrections of erroneously collected tax revenue are treated as negative revenue. Tax as a percentage of GDP is quite low throughout the years because resources are in abundance to generate wealth, hence revenue from tax is low.
6. Trade/GDP
Trade is the sum of exports and imports of goods and services measured as a share of gross domestic product. A high portion of gdp is being utilized in trade.
- Oman’s main item of exports: Petroleum, fish, metals, textiles;
- Oman’s main item of imports: Machinery and transport equipment, manufactured goods, food, livestock, lubricants.
7. External Debt
This entry gives the total public and private debt owed to nonresidents repayable in foreign currency, goods, or services. These figures are calculated on an exchange rate basis, i. e. , not in purchasing power parity (PPP) terms. Higher oil prices resulted in huge trade and current account surpluses from 2005 to 2008. A surplus on the current account stood at US$ 5. 47 billion (9. 1% of GDP) in 2008 compared to US$2. 59 billion (6. 2% of GDP) in 2007. The economy realized a marginal surplus of $0. 14 billion (0. 3% of GDP) in 2009 due to the global crisis and the slump in the world oil market. However, the economy is expected to realize higher surpluses of $1. 48 billion (2. 4% of GDP) and $2. 4 billion (3. 2% of GDP) in 2010 and 2011, respectively on the back of likely recovery in the global oil market. Bearing in mind the considerable remittances by foreign workers, profit remittances by the foreign partners of Petroleum Development Oman (PDO), as well as those of private-sector foreign companies in Oman, there will be a strong positive impact on current account balances.
8. Saving/GDP
It shows the ratio of savings and GDP.
9. Real Interest Rate
The interest rate is the cost of borrowing and the real interest rate is interest after deducting inflation as measured by the GDP deflator. In 2009, due to the world oil crisis, Oman’s economy shrank and therefore its external debt increased, as a result, there was increase in the cost of borrowing. Therefore the real interest rate rose up to 40% in 2009, also keeping in mind a lower inflation rate of 3. 9%.
10. Exchange Rate
The exchange rate refers to the exchange rate determined by national authorities or to the rate determined in the legally sanctioned exchange market. It is calculated as an annual average based on monthly averages (local currency units relative to the U. S. dollar).
From 1973 to 1986, the rial was pegged to U. S. dollar at 1 rial = 2. 895 dollars. In 1986, the rate was changed to 1 rial = 2. 6008 dollars, which translates to approximately 1 dollar = 0. 384497 rials. The Central Bank buys U. S. dollars at 0. 384 rials, and sell U. S. dollars at 0. 385 rials. Now it is the third highest. Oman has a strong currency which may have the following disadvantages assuming all factors remaining constant:
- The lower price of imports leads to consumers increasing their demand and this can cause a large trade deficit. Exporters lose price competitiveness because they will find it more expensive to sell in foreign markets and face losing market share - this can damage profits and employment in some sectors and industries.
- If exports fall, this causes a reduction in aggregate demand and reduces the short-term rate of economic growth as measured by the % change in real GDP.
- Because investment is partly dependent on the strength of demand, if exports fall, then so will business confidence and capital investment.
Sources:
- http://www. gulfbase. com/
- http://www. indexmundi. com/
- http://www. worldbank. org/
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Economic Indicators of Oman. (2017, Mar 23). Retrieved from https://phdessay.com/economic-indicators-of-oman/
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