Oman’s construction sector to fall 5.8% in 2021, report says
GlobalData projection based on factors including over 10% contraction this year amid effects of Covid-19, low oil prices and public spending cuts
Oman’s construction industry may have contracted by 10.3% this year due to the effects of the Covid-19 pandemic and other factors, and will also feel the brunt of harsh fiscal consolidation going ahead in the short term, with construction output expected to fall by 5.8%.
A report by the data and analytics company GlobalData added that the sharp fall in 2020 is also due to other factors coming together, such as 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 rationalise 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 its financial plan, which is intended to reduce public debt, increase the state’s reserves and diversify revenue away from oil.
Yasmine Ghozzi, economist at GlobalData, said: “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 recognised 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.
“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,” Ghozzi added.
