Lower oil prices and the impacts of the Covid-19 pandemic will continue to challenge Oman’s economy and real estate sector
There is a strong historic correlation between Oman’s GDP trend and movement in oil prices. Following the impacts of the global financial crisis in 2008/09, the economy recovered and grew steadily between 2010 to H1 2014. However, the effects of the drop in oil prices in mid-2014 became evident in 2015 and had a significant negative impact on the GDP which dropped by almost 20% from 2014 to 2016. This was followed by a strong economic recovery in 2017 and 2018 by 7.3% and 12.1% respectively against the backdrop of higher oil prices before the economy dipped again in 2019.
The outlook continues to remain challenging as the oil sector is still weighed down by the extended OPEC+ cuts and a rise in COVID-19 infections has prompted localised lockdowns in Dhofar, the country’s largest province, and several other tourist destinations, challenging rebound prospects. To add to the economic woes, the average monthly global oil price dropped from US$ 61/barrel in January 2020 to US$ 20/barrel in April 2020, albeit a projected recovery to around US$ 40/barrel by Q4 2020. Consequently, we would expect to see a marked decline in GDP in 2020 and a slower pace of recovery thereafter.
Low oil prices are a key challenge for the Sultanate’s economy which remains heavily reliant on oil. It also has a huge bearing on the population and employment trend in the country. A case in point, the total population of Oman grew from 3.6 million in 2012 to 4.6 million in 2016 and has levelled off since then. This growth was driven primarily by the expatriate population which grew from 1.5 million in 2012 to 2.1 million in 2016. Current evidence suggest that a net exodus of highly qualified expatriates started in 2016 due to economic conditions and increasing restrictions on expatriate employment. The number of highly qualified expatriates dropped by 17.6% between 2016 to Q1 2020 while the total number of expatriate employees dropped by 6.8% during the same period.
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