Oman to Create 25,000 State Jobs by Year-End Amid Downturn

(Bloomberg) -- Oman pledged to create 25,000 public sector jobs by December, a move aimed at staving off potential unrest over unemployment but one that risks adding to a budget gap that was the Gulf's widest last year.

The government will follow up with additional measures to address the lack of jobs in the sultanate, the state-run Oman News Agency reported on Wednesday, citing the cabinet's decision a day earlier. Unemployment was 17.5 percent in 2016, according to the World Bank.

The move has echoes of the government's pledge to create 50,000 jobs in 2011, after an unprecedented wave of protests as part of the Arab Spring left two people dead in clashes with security forces. Six years on, the economy is the trigger. Oman's budget deficit was about 21 percent of gross domestic product in 2016, the highest in the six-nation Gulf Cooperation Council, according to International Monetary Fund data. Its gross debt ratio was almost three times that of Saudi Arabia -- the region's biggest economy.

“It's a tough balancing act for the sultanate, and I can see why weakening growth and ready access to funding would encourage the authorities to spend,” said Simon Williams, HSBC Holdings Plc's chief economist for central and eastern Europe, the Middle East and North Africa, adding that the government's financial position should give it pause. “Long-term stability requires sustained adjustment, even at the cost of short-term pain.”

Oman has smaller oil reserves and less of a cushion in government savings than its wealthier neighbors, making it vulnerable to the impact of lower oil prices that has depressed growth across the region. Moody's Investors Services cut Oman's rating it its second-lowest investment grade in July, citing the sultanate's limited progress in addressing structural vulnerabilities. Oman has a sub-investment grade status at S&P Global Ratings.

Oman's benchmark MSM30 Index of stocks has retreated 9.4 percent this year.

The hiring plan could spur private consumption amid slow growth in the non-hydrocarbon sector, said Carla Slim, an economist at Standard Chartered in Dubai. She expects Oman's 2017 budget deficit to exceed the government's target of 11.7 billion Omani riyals ($30.4 billion), though higher oil prices this year should narrow the deficit relative to 2016.

To contact the reporter on this story: Alaa Shahine in Dubai at asalha@bloomberg.net.

To contact the editors responsible for this story: Shaji Mathew at shajimathew@bloomberg.net, Alaa Shahine at asalha@bloomberg.net, Stuart Biggs, Mark Williams