The small non-OPEC oil producer was hit by protests against graft, low salaries and unemployment earlier this year, prompting the government to boost budget spending by 14 percent over its original plan.
Analysts said data on Monday showed the extra spending had fuelled a spike in the cost of personal care items.
"Oil prices have been supporting us. Although we anticipated at the beginning of the year a deficit, we think we will be able to break even, in spite of the additional spending the government has announced during the course of the year," said, Finance Minister Darwish al-Balushi.
Balushi said he expected a $10 billion aid package, pledged by wealthier fellow Gulf Arab oil exporters in March, to begin flowing in the first quarter of 2012.
"Basically it's going to be used to create jobs for Omanis," he told reporters on the sidelines of an investment forum in the Omani capital. "Some of the countries have acted more quickly than the others but eventually, all will come."
The government of Sultan Qaboos bin Said, a US ally who has ruled normally tranquil Oman for 40 years, promised a 1 billion rial ($2.6 billion) spending package in April after nearly two months of protests inspired by Arab revolts against autocratic rule. Since then there has been no significant unrest.
On Monday, Balushi said economic growth was projected to be 5 percent in 2012 and 5.5 percent in 2011. Analysts polled by Reuters in September forecast 4.0 percent growth in 2011 and 4.2 percent next year after an estimated 4.1 percent in 2010.
"Next year we are looking for 5 percent (growth) as long as the oil price sustains in the range of $80 and above. Our break even is a little above $80. But $80 will keep us and I think everybody comfortable," Balushi said.
The sultanate based its 2011 budget on a projected oil price of $58 per barrel and expected expenditures of 8.1 billion rials and a deficit of 850 million rials, or 3.8 percent of gross domestic product before the unrest started in February.
The Reuters poll forecast a surplus of 5.0 percent of gross domestic product for 2011.
The budget surplus widened to 736.5 million rials, or 3.3 percent of GDP, at the end of August, finance ministry data showed on Monday. The country sold its oil at an average price of $101 per barrel in January-August.
Oman, which has the lowest government debt among Gulf Arab oil exporters at 5.1 percent of GDP, plans to issue about 150 million rials in development bonds this year. There are no plans to issue sovereign debt internationally, Balushi added.
Inflation in the country, which pegs its rial currency to the dollar, accelerated to 5.3 percent year-on-year in August from July's 4.6 percent, the data showed, above the central bank's full-year forecast of 4 percent.
On the month, consumer prices soared by 1.4 percent with the last such a jump seen ahead of the global financial crisis in June 2008, fuelled mainly by a 10.4 percent spike in personal care items.
"Post crisis, it is a high figure," said Giyas Gokkent, chief economist at the National Bank of Abu Dhabi.
"I assume that this (increase in personal care items) is a sort of one-off thing and this factor is going to fade away. We are assuming the headline reading for the sultanate CPI to hover around 5 percent in 2011," he said.
The central bank said in June that inflation may rise due to government spending aimed at soothing social tensions.
Copyright Reuters, 2011