2006 Review of the Economy of the Sultanate of Oman

     2006 was a very good year for the economy of the Sultanate of Oman with high GDP growth at 15.6%. The overall rate of growth has begun to slow down due to growth deceleration in the oil sector. However, this masks the very positive growth acceleration in the non oil sector, driven by the growth of value addition from OLNG, Qalhat LNG and the Oman India Fertiliser Company, the trade and transport and communication sectors as well as the other non oil manufacturing sector.

     These high levels of growth have led to large increases in the current account balance which has enabled foreign reserves to be built up. The Government Budget Balance has continued to grow to RO 380 million. These positive developments have led to rises in the Sultanate’s Investment Grade Credit Ratings in the second half of 2006 with Standard and Poor’s raising its rating of the Omani Rial to A- and Moody’s raising their rating to A3 with a positive outlook. The IMF’s Executive Board said in their March 2007 Announcement:

    “The Executive Directors commended the Omani Authorities’ outward-oriented development strategy and sound economic management, which have led to large fiscal surpluses, a stable financial system, a sizeable accumulation of foreign reserves and very little public debt.” (Public information Notice No. 07/35, International Monetary Fund, March 2007)

      2006 saw Oman enter an interesting phase of the economic cycle with an increase in inflation and the lowest real interest rates in a decade. Liquidity growth has surged upwards, allowing a major expansion in the amount of credit extended to the corporate and household sectors. How these funds are used and the extent to which they are put to productive use will in part determine the growth rate in the next period

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