Oman may budget surplus widens, inflation at 27-month low
Budget surplus at 1.6 bln rials in Jan-May; Oil output up in May despite strikes; Inflation at 2.2 percent in May vs 3.0 pct in April
July 11, 2012 4:39 by Reuters
Oman’s budget surplus rose to 1.6 billion rials ($4.2 billion) in the first five months of this year as oil revenue soared, while inflation slowed sharply, data showed on Wednesday.
The budget surplus is equivalent to about 5.7 percent of the sultanate’s 2011 nominal gross domestic product, according to a Reuters calculation.
Oman, which faces a challenge to create tens of thousands of jobs every year for its fast-growing population, has raised its budget by 23 percent to 10 billion rials this year compared to its original projection for 2011.
In January-May, the Gulf Arab sultanate’s revenue jumped 34 percent year-on-year to 6.1 billion rials, or 69 percent of the initial full-year projection, the data showed.
In May, large-scale strikes hit oil facilities in Oman, which flanks a key oil shipping lane. But the data showed output increased to 25.3 million barrels from 23.6 million in April.
Spending was up 38 percent from a year earlier at 4.5 billion rials in the first five months of the year.
Higher oil prices helped public finances improve significantly compared to a year ago when the government posted a mere 184 million-rial surplus for January-May.
A Reuters poll this week forecast the non-OPEC oil producer would post a fiscal surplus of 6.5 percent of GDP in 2012, up from a forecast of 5.0 percent by analysts in March, and rising from 3.5 percent last year.
Prices of crude, which accounts for 77 percent of Oman’s income, fell $40 to as low as $88 per barrel for Brent between March and June but have since stabilized at above $98..
Oman sold its crude at an average $113.5 per barrel in January-May, up 20 percent from a year ago. As a result, net oil revenue jumped 33 percent to 4.5 billion rials.
The sultanate would still post a surplus in 2012 if oil prices stay at current levels, as the poll forecast Oman’s budget break-even oil price at $83 per barrel. But that level is expected to rise to $105 by 2016, the IMF said in December.
The central bank has said it and the government have scope to keep pursuing expansionary policies without threatening economic stability, adding the budget may turn out to be in surplus in 2012 given still-robust oil prices.
Social unrest last year prompted Sultan Qaboos bin Said, a U.S. ally who has ruled Oman for 42 years, to pledge an extra $2.6 billion of spending in April 2011.
Oman, which obtained pledges in March 2011 for $10 billion in aid over 10 years from its wealthier Gulf neighbours, forecasts a budget deficit of 1.2 billion rials for 2012, or 4.3 percent of 2011 GDP. The projected oil price is $75 per barrel.
The data also showed that annual consumer price growth in Oman slowed sharply to 2.2 percent in May, the lowest level since February 2010, from 3.0 percent in April.
On the month, prices in the country, which pegs its rial to the U.S. dollar, fell 0.3 percent helped by a fall in costs of personal care and services, after a 0.1 percent rise in April. Main index components, food, rents and transport, were flat.
The Reuters July poll forecast average inflation in Oman at 3.2 percent in 2012, down from a three-year high of 4.0 percent last year.