Oman untouched by global market turmoil

The uprisings in the Middle East had created some social and political uncertainty for Oman Oman’s economy has been unaffected by turmoil in global financial markets and the euro-zone debt crisis because its oil exports are mainly to faster-growing Asian countries, the International Monetary Fund said on Tuesday.
The IMF said, however, the Arab Spring uprisings in the Middle East and North Africa had created some social and political uncertainty for Oman.
“With about 80 percent of Oman’s oil-dominated exports going to Asia, the impact of the European crisis will be limited as long as it does not translate into significantly lower oil prices,” the IMF said in a statement.
The IMF said gross domestic product growth in Oman was set to ease to 5 percent in 2012 due to some slowdown in the Gulf state’s hydrocarbon output. Inflation is likely to remain moderate at an annual rate of about 3.5 percent, the IMF added.
It said new infrastructure projects, including a rail network, airport and sea ports, will help sustain growth over the medium term. Oil production is set to flatline and then decline slightly, the IMF said.
The biggest risk to the outlook is a lasting drop in oil prices. Higher government spending is raising the oil price that would be needed to balance the budget.
The IMF projected that a break-even price of $81 per barrel in 2012 would rise to $105 by 2016.
“A drop in oil prices from the prevailing historically high levels could quickly lead to large fiscal deficits,” the IMF said, adding: “If sustained, lower oil prices could force a pullback in spending and lead to sharply reduced growth in the non-oil economy.”
A hiring spree by the government has led to a large increase in the public sector, which the IMF said had eased short-term unemployment pressures but not addressed underlying problems.
“Removing labor market distortions underpinning high unemployment will require resolving the wage and benefits differentials between the public and private sectors and between Omanis and expatriates,” the IMF said.