meed-logo

line1 line2 line3
SIGN IN / REGISTER

Muscat performs tricky budget balancing act

12 December 2023

 

On 11 November, Oman’s Etco Space sent its first nano-satellite, Aman-1, into orbit aboard a SpaceX Falcon 9 rocket launched from California. It is the sort of endeavour Muscat is keen to promote as it tries to diversify its economy.

Etco Space chief executive Abdulaziz Jaafar said his company will be “pushing the boundaries of our space programme in the coming months and years”. It aims to launch more satellites and get involved in deep-space missions. 

Oman’s economy needs to find new areas to exploit. GDP growth slowed from 4.3 per cent in 2022 to 1.3 per cent in 2023, according to the Washington-based IMF. The organisation expects the growth rate to revive to 2.7 per cent in 2024, but that is at least partly dependent on a rebound in hydrocarbons production.

This may not come to pass. Oman is part of the wider Opec+ arrangement to curb production and at the group’s meeting on 30 November, Oman agreed to cut 42,000 barrels a day (b/d) from its output during the first quarter of 2024. Opec said the cuts will be gradually unwound later in the year “subject to market conditions”.

Soft oil prices

It is not just about output, however. Oil prices have also been weaker in 2023. The Finance Ministry says Oman received $81 a barrel on average in the first nine months of 2023, compared to $94 in the same period last year. 

Caroline Bain, chief commodities economist at Capital Economics, said the Opec+ cuts “should at least act as a floor under prices at current levels, but we would be surprised if it prompted a sustained price rally”.

As it stands, Oman’s net oil revenues were RO4.8bn ($12.5bn) in the first nine months of 2023, 10 per cent lower than a year ago. 

Gas revenues have fallen even more significantly – by 42 per cent to RO1.6bn – prompting an overall drop in public revenues of 16 per cent, or RO1.7bn.

Wider market dynamics mean the pressure is likely to continue into 2024. Bhushan Bahree, executive director at S&P Global Commodity Insights, says that crude prices are “under pressure from a looming oil over-supply early next year”, amid strong oil production growth in the Americas.

The economic pressures follow a period of fairly benign conditions. High oil revenues in recent years have enabled Omani authorities to post fiscal and current account surpluses and pay off some sovereign debt. 

Such trends have prompted the main credit ratings agencies to issue upgrades. In May 2023, Moody’s Investors Service promoted Oman from Ba3 to Ba2, while both Standard & Poor’s and Fitch Ratings upgraded the sovereign from BB to BB+ in September.

Debt and spending

Government debt rose from just 5 per cent of GDP in 2014 to a peak of 68 per cent in 2020, but since then there has been a concerted effort to reverse that trend. By 2022, it had dropped to 40 per cent of GDP and Fitch predicts it will stabilise at about 35 per cent in 2024-25. 

Overall public debt is now at about RO16.3bn, levels last seen in 2018-19.

Despite the lower oil and gas revenues, the government has kept its spending discipline, with expenditure down 14 per cent in the first nine months of the year. This has meant the budget remains in surplus, albeit at lower levels than in 2022. Figures from the Finance Ministry show a surplus of RO791m for the first nine month of 2023, down from RO1.1bn in the same period a year earlier.

In the longer-term, Oman is pinning much of its hopes on hydrogen production. Hydrogen Oman (Hydrom) signed five deals for projects in Duqm in mid-2023, involving total potential investment of $30bn. It is hoping a second round of deals, covering blocks of land in the Dhofar region, could attract a further $20bn-$30bn, with awards due in early 2024.

Hydrom managing director Abdulaziz al-Shidhani has said total investments in the sector could reach $140bn by 2050, by which time the country is hoping to produce 8 million tonnes a year (t/y) of green hydrogen. There is an interim target of 1 million t/y by 2030.

Even if these investment and production targets are achieved, oil and gas will remain central elements of the Omani economy for some time. In a sign of the sector’s continuing importance, the $7bn OQ8 refinery project in Duqm is due to be completed by the end of 2023, with partners OQ and Kuwait Petroleum International aiming to process about 230,000 b/d of oil once it is up and running. 

Compared to the undulations in oil and gas and the wider economy, Oman’s political scene is far more stable. Since taking over in 2020, Sultan Haitham bin Tariq al-Said has pushed economic reforms but made few changes on the political side, other than gradually adjusting some of the key personnel. In late October, he appointed new governors to take over in South Al-Batinah, North Al-Sharqiyah and Al-Wusta.

There have also been public protests in Muscat over the Gaza war, but they have been more limited than some other demonstrations in recent years, such as the protests against high unemployment and inflation seen in 2018 and 2019 in cities around the country. 

As long as the government can keep the economy relatively stable, it should also be able to maintain the political equilibrium.

MEED's January 2024 special report on Oman also includes:

> BANKING: Omani banks look to projects for growth
> POWER & WATER: Oman expands grid connectivity

https://image.digitalinsightresearch.in/uploads/NewsArticle/11364460/main.gif
Dominic Dudley

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • June 2025: Data drives regional projects

    30 June 2025

    Click here to download the PDF

    Includes: Top 10 Global Contractors | Brent Spot Price | Construction output

    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/14171168/main.gif
    MEED Editorial
  • UAE-Turkiye financial links strengthen

    30 June 2025

    This package on UAE-Turkiye relations also includes:

    > UAE-Turkiye trade gains momentum
    > Turkiye’s Kalyon goes global

     

    Turkish bank DenizBank is one of Turkiye’s leading private banks and, as a wholly owned subsidiary of Emirates NBD since 2019, it is playing a leading role in developing business links between the UAE and Turkiye.

    Recep Bastug, who was appointed as DenizBank’s CEO in 2024, says there is great potential for trade between the two countries. 

    “Turkiye is a growing country,” he says. “We’ve had volatility over the past five years, but the Turkiye economy and the banking sector have been able to manage those periods successfully.”

    Having spent years with international institutions such as BBVA, Bastug has vast experience in the banking sector. “Turkish banks, especially private ones like DenizBank, are very successful. In terms of capital, balance sheet structure and digital transformation, we are in a strong position,” he says.

    Solid fundamentals

    Turkiye’s fundamentals remain solid with a diversified export-oriented economy, a young and skilled population of 85 million, and relatively low debt levels. “We are not a highly leveraged country. Our household debt-to-GDP ratio is low. With the right policy mix, we offer high potential for foreign investors,” says Bastug.

    That potential is increasingly being realised through growing engagement with the GCC and the UAE. “Turkiye’s connection with the Gulf is going up, and DenizBank is set to play a serious role in these relations. Day by day, Turkish companies are expanding their footprint in the region.”

    GCC projects

    Baştug says that many of these companies approach DenizBank to help facilitate their entry into Gulf markets. “Some of our clients are extremely well capitalised, but others need support for major projects. Just recently, one Turkish company announced a $3bn project in the region. We’re helping them connect with Emirates NBD and navigate the local financial landscape.”

    DenizBank is actively supporting the creation of trilateral partnerships – particularly between Turkiye, the UAE and Saudi Arabia. “We see huge opportunity in forming financial strongholds across these markets, leveraging Turkiye’s contractor experience, the UAE’s capital and Saudi Arabia’s scale,” says Baştug.

    DenizBank is already delivering results. “With Emirates NBD, we’ve identified 10 strategic cooperation areas, including trade finance, payments and capital markets. Thanks to this partnership, Emirates NBD has become the number one debt capital markets bank in Turkiye, even ahead of global players.”

    One area of growing activity is initial public offering (IPO) participation. “We’ve launched a mutual fund that allows Turkish private banking clients to participate in IPOs from the region, including from the UAE and Saudi Arabia. It’s a diversification strategy and helps retain wealth within the group.”

    Turkiye’s connection with the Gulf is going up, and DenizBank is set to play a serious role in these relations. Day by day, Turkish companies are expanding their footprint in the region
    Recep Bastug, DenizBank

    Inflation ends

    Despite the current inflationary environment, Bastug says there is a clear inflection point ahead. “We expect 2027 to be a turning point. Once we exit the inflationary accounting regime [in Turkiye], DenizBank will become one of the biggest contributors to Emirates NBD’s global balance sheet. Last year, we contributed $1.2bn. In 2027, it will be significantly more.”

    DenizBank is the fifth-largest private bank in Turkiye with about a 5% market share. “The largest private bank is at 13%. It’s not easy to close that gap – but we will do it. Our long-term goal, aligned with our shareholder, is to become the biggest and most successful private bank in the country.”

    The bank is especially focused on agriculture, SMEs, and export financing – sectors that are deeply relevant to
    Turkiye’s economic growth and to regional demand. “We are the leading agricultural bank in Turkiye, and we believe strongly in the sector’s future – both for local consumption and exports.”

    Regional opportunities

    Bastug also sees potential for engagement beyond the GCC, including in post-conflict reconstruction. “In the past, Turkiye had strong trade volumes with Syria. Even during wartime, commercial links remained. Once a stable environment emerges, there will be opportunities – especially in infrastructure.”

    While a physical branch presence is not currently being considered, DenizBank is prepared to support Turkish contractors operating in neighbouring countries. “We have the relationships and expertise to facilitate this growth. And culturally, we’re well aligned with the region – it helps make business smoother.”

    As Turkiye re-establishes economic momentum and Gulf economies look to deliver on long-term visions, DenizBank is positioning itself for a more active role in the region in the future. “We are preparing the bank for the next stage, and with the backing of Emirates NBD, we’re confident in our ability to lead.” 

    READ MORE
    > UAE-Turkiye trade gains momentum
    > Turkiye’s Kalyon goes global

    https://image.digitalinsightresearch.in/uploads/NewsArticle/14170372/main.gif
    Colin Foreman
  • Multiply agrees to sell Pal Cooling to Tabreed and CVC

    30 June 2025

    Abu Dhabi-based investment company Multiply Group has agreed to sell all of its shares in its district cooling subsidiary Pal Cooling Holding (PCH) for AED3.8bn ($1bn) to a consortium comprising Engie-backed National Central Cooling Company (Tabreed) and CVC DIF.

    The transaction is still subject to regulatory approvals.

    MEED exclusively reported in May that a team comprising Tabreed and CVC was holding exclusive discussions to acquire PCH.

    Multiply Group initially acquired a 100% stake in PCH and its subsidiaries in July 2021.

    Multiply Group has been advised by Standard Chartered and Clifford Chance. Tabreed and CVC DIF have been advised by Citi, Synergy Consulting and White & Case.

    The transaction brings together two of the UAE’s leading district cooling players. PCH was founded in 2006 and operates five active district cooling plants across the UAE. The company maintains eight long-term concessions and strategic partnerships with some of the UAE’s leading real estate developers, servicing key residential, commercial and mixed-use developments – most notably on Abu Dhabi’s Reem Island.

    Tabreed owns and operates 92 plants, including 76 in the UAE, five in Saudi Arabia, eight in Oman, one in Bahrain, one in India and one in Egypt, in addition to other international projects and operations.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/14170511/main.jpg
    Colin Foreman
  • Iraq approves Basra housing project

    30 June 2025

    Iraq has approved plans to build a housing project in Basra that will offer about 5,000 homes in the first phase to tackle the country’s rising housing shortage.

    The project, which is endorsed by Iraq’s National Investment Commission (NIC), will cover an area of about 3 square kilometres.

    According to local media reports, Basra province governor Asaad Al-Idani said the project has already been awarded to a developer.

    Iraq has been gradually recovering since the war. The government initially prioritised infrastructure and public housing to stimulate economic growth, improve living standards and attract foreign investment.

    More recently, benefitting from higher oil prices and a period of relatively stable governance, Baghdad has expanded its focus to reconstructing and modernising the country’s deteriorating infrastructure.

    The Iraqi construction market has also seen significant investments from private real estate developers from the region. In May, Egyptian real estate developer Ora Developers announced that it had started construction on the Al-Wardi residential city project, which consists of more than 100,000 residential units covering about 61 million square metres (sq m) on the southeastern side of Baghdad.

    The move is the latest sign of international investors’ growing appetite for developing real estate in Iraq as part of the country’s post-war building initiatives.

    Also in May, another Egyptian firm, Talaat Moustafa Group Holding, said it was in negotiations with the NIC to develop a mixed-use project. The project, which will cover an area of about 14 million sq m and will be located in the southwest of Baghdad, is expected to contain about 45,000 residential units.

    The positive sentiment has been particularly buoyed by a robust 2024 budget, which allocated nearly $42bn to transport, social infrastructure and housing initiatives.

    Looking ahead, Iraq’s construction industry is expected to register an annual average growth rate of 4.9% in 2025-28, supported by further investments in energy, infrastructure and housing projects, according to UK analytics firm GlobalData.

    MEED’s June 2025 report on Iraq includes:

    > COMMENT: Iraq maintains its pace, for now
    > GOVERNMENT & ECONOMY: Iraq’s economy faces brewing storm
    > OIL & GAS: Iraqi energy project value hits decade-high level
    > PIPELINES: Revival of Syrian oil export route could benefit Iraq
    > POWER: Iraq power sector turns a page
    > CONSTRUCTION: Iraq pours billions into housing and infrastructure projects
    > DATABANK: Iraq forecast dips on lower oil prices

    https://image.digitalinsightresearch.in/uploads/NewsArticle/14170011/main.png
    Yasir Iqbal
  • Meraas announces Dubai City Walk expansion

    30 June 2025

    Register for MEED’s 14-day trial access 

    Local real estate developer Meraas has announced the City Walk Crestlane project as it continues to expand its City Walk residential community in the Al-Wasl area of Dubai.

    The City Walk Crestlane comprises two residential towers offering 198 one-, two-, three-, four- and five-bedroom units.

    The project is expected to be completed and handed over by the third quarter of 2028.

    Earlier this month, Meraas, which is part of Dubai Holding Real Estate, awarded a construction contract for another project at City Walk.

    The local firm Naresco Contracting was awarded a AED450m ($123m) contract for the main construction works on its Central Park Plaza residential project at City Walk.

    The project involves constructing two towers with 23 and 20 floors. Together, they will have 212 residential units.

    In May, Meraas awarded another local firm, Al-Sahel Contracting Company, a AED300m contract for the main construction works on Elara, which is phase seven of the Madinat Jumeirah Living masterplan in Dubai.

    The project involves building three residential towers with 234 apartments.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/14169472/main.jpg
    Yasir Iqbal