Oman Infrastructure Report Q2 2016
BMI View: Growth in Oman's construction industry will come primarily from investment in transportinfrastructure projects and the government's push for public-private partnerships to mobilise privateinvestment into the construction sector. This will become increasingly important as global oil prices remainlow, curbing government spending.
Latest Updates And Structural Trends
We have revised down our construction industry growth forecast for Oman in 2016 from 3.9% to 2.41%in real terms, reflecting the negative impact of sustained low oil prices. Our Oil & Gas team again reviseddownwards its Brent oil price forecast this quarter, forecasting Brent to average USD40 per barrel (bbl) in2016, after an average of USD97.2/bbl in the last five years.
The government's push for public-private partnerships (PPPs) will be key to increasing private sectorinvestment in infrastructure and this is critical for the country's future economic development, given thenew oil price environment.
We forecast gross fixed capital formation (GFCF) to average 4.6% over the next five years, compared tothe 7.9% in the last five years. This difference reflects our more moderate construction industry growthforecast in the short-to-medium term.
Oman's transport sector has been experiencing significant expansion and this is set to continue -following the government announcement in October 2013 the country will spend over USD50bn ininfrastructure projects over the next 15 years. From this budget, USD20bn is earmarked for the transportsector - including Oman National Railway - which is where we see the strongest pipeline of projects.
Particular opportunities lie in the development of the country's road and railway network.
The Omani government's anti-corruption campaign has been extensive by Gulf standards and willcontinue in the years ahead. These efforts will strengthen the sultanate's business environment, attractingprivate investment in the construction industry.
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