OMAN: Fiscal deep dive 1: H1 performance won’t be sustained

GULF COUNTRIES - Forecast 30 Aug 2019 by Justin Alexander

H1 fiscal numbers were surprisingly good thanks to one-off gains including the lagged impact of the 2017 income tax law and higher 2018 oil prices, a surge in investment income, and the sale of a stake in Khazzan gasfield. However, this will not be sustained in H2, when seasonal trends mean there will higher expenditure and lower non-oil revenue, and oil prices will also be lower. We forecast a full-year deficit of about -7% of GDP, including investment income, below consensus (-10% of GDP). This is already financed, and so Oman shouldn’t need to return to the international bond market in 2019 unless it decides conditions are ripe to pre-finance the 2020 deficit. In 2020, we expect a slightly narrower deficit (-6% GDP or $4.5bn) due mainly to higher oil prices, requiring about $3-4bn in financing from international bonds.

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