Oman's GDP to grow 2.7 in 2016 and 3 next year: AMF

4/11/2016 9:41:17 AM

(MENAFN- Muscat Daily) Muscat-

The GCC economies are expected to grow at a lower average rate of 2.5 per cent this year and 2.6 per cent in 2017 reflecting the slump in oil prices and impact of fiscal measures being taken by governments according to the Arab Monetary Fund (AMF).

According to AMF projections Oman's economy is expected to grow by 2.7 per cent this year before recovering to three per cent in 2017. Oman's real GDP growth is expected to be higher than the estimates for Saudi Arabia (2.2 per cent) Kuwait (1.3 per cent) and Bahrain (2.5 per cent) this year while the UAE and Qatar economies are expected to grow by three per cent and 3.2 per cent respectively.

The Abu Dhabi-based AMF released its March edition of the Arab Economic Outlook on Saturday which includes projections for the macroeconomic performance of Arab countries in 2016 and 2017.

The AMF said that OPEC producers are expected to reach an agreement not to further increase oil output levels which in conjunction with the decline in shale oil production will strengthen crude prices and bring about relative stability in the oil market. It is projected that the average price of oil will be US$40 per barrel in 2016 the AMF said.

'The GCC growth rate is forecast to be 2.5 per cent in 2016

reflecting mainly the developments in the global oil market and impact of fiscal corrective measures. In 2017 the growth rate is estimated to recover to 2.6 per cent supported by the likely increase in international oil prices' the AMF said.

The Fund said that in 2017 public finances are expected to see a significant improvement in the region amid expectations of higher revenue as a result of expected 15 per cent increase in oil prices next year.

On the monetary policy front the AMF said most regional countries with fixed exchange rate regimes increased their overnight deposit rates by 25 basis points in response to the US interest rate hike. 'Oil exporting Arab countries face the challenge of decreasing oil prices with the possibility of increasing their interest rates to follow the expected increases in rates in the US throughout 2016 and 2017.'

The AMF added that the US dollar interest rate hike will reflect positively on the proceeds of investment income from Arab countries.

It said that lower oil prices and an economic slowdown in the GCC are expected to negatively affect the growth rate of bank deposits especially considering the size of their financial systems.

'Yet the main challenge in the coming years is to maintain a low level of non-performing loans highlighting the importance of sustaining government expenditure levels to boost domestic demand without jeopardising fiscal sustainability' it said.

The AMF estimates economic growth of the Arab economies as a group to reach 2.8 per cent in 2016 before recovering to 3.1 per cent in 2017 helped by rapid pace of growth in Arab oil-importing countries which are expected to growth by 3.8 per cent in 2016 and 4.3 per cent in 2017.

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