Oman’s construction sector will feel the brunt of harsh fiscal consolidation in the short term, says GlobalData

Oman’s construction industry is set to contract sharply in 2020, plummeting by 10.3%, according to GlobalData, a leading data and analytics company. The industry is struggling with the challenges presented by the COVID-19 outbreak, low oil prices and the impact of sovereign credit rating downgrades. Further compounding the downside risks to the outlook for the industry, the Omani Government has had to rationalize spending, given its weak fiscal position. Public sector spending cuts will be the government’s priority in 2021, continuing throughout the medium term (2022-24), as outlined in the MTFP. The fiscal plan is intended to reduce public debt, increase the state’s reserves, and diversify revenue away from oil.

Yasmine Ghozzi, Economist at GlobalData, comments: “Given the limited prospects for the government to boost investment in infrastructure and other investment projects, a recovery in the construction sector is expected to be very slow. GlobalData currently expects the construction industry to fall further in 2021, with output contracting by 5.8%.

“Looking further ahead, GlobalData considers the prospects for capital expenditure projects in the tourism and manufacturing sectors as being key to the construction industry’s recovery. These sectors have been recognized as long-term drivers of revenue diversification and economic growth for the Sultanate.”

Investment in the transport infrastructure sector will also be vital, with key projects planned including the $1bn road connecting the towns of Dibba and Khassab in the northern Musandam governorate. There are also plans to build a mining rail in the country’s southern region to carry heavy freight from three locations in the Dhofar governorate to a central location, which will then connect to a separate rail line that runs to Duqm port, where the minerals will be exported to other markets by sea.

Ghozzi continues: “While Sultanate’s oil output will remain compliant with OPEC+ production cut agreement, the economy will be supported by rising natural gas output from the Khazzan field in the northwest of the Sultanate, as well as higher liquefied natural gas (LNG) production along with the Duqm refinery, which is set to become operational in 2023 after prolonged delays.”

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