Favourable oil prices continue to support the economic recovery scene in Oman. Sustained reform momentum and growth would have a bounce in the coming year, according to an IMF mission statement.
Cesar Serra, the head of the IMF team says, the economy has a growth of 4.3% in 2022, significantly driven by the hydrocarbon sector, and slowed down to 2.1% at the beginning of 2023 due to the Opec+ related oil production cuts. Non-hydrocarbon growth had an increase of 2.7% in the first half of 2023, driven by recovering activities in the agricultural and construction sector and robust services area.
The IMF statement covers the team’s discussions with Omani officials held in Muscat from November 1 – 15.
According to the statement, inflation fell back to 1.2% in the first half of 2023, and careful financial management and high oil prices have increased financial and current account balances in 2022. Sovereign credit rating in Oman is increased to one notch below investment grade, and the sovereign spreads become equal with the average of Gulf Cooperation Council countries and below that of upcoming markets.
With a favourable economic outlook, growth is expected to decrease to 1.3% due to the Opec+-related oil production cuts. It is expected to rebound in the first months of 2024, due to the increased hydrocarbon production and excellent non-hydrocarbon growth. However, high uncertainties in oil price volatility, worldwide economic and fiscal developments, and indirect spillovers from the current conflict in Gaza will affect the economic outlook in the country.
Oman authorities are sticking to maintaining financial discipline while improving the social safety net. Non-hydrocarbon primary deficit will decrease to 3.4% of non-hydrocarbon GDP in 2023 than that of 2022. A medium-term financial framework and good progress under the medium-term financial plan will help strengthen financial discipline and credibility.
Vision 2040 is supported by sustained efforts for effective implementation. The new labour law was formulated to enhance working conditions, make the labour market more flexible, and improve female participation in the labour force. Sustained efforts are going on to develop an efficient business ambiance. A good number of investments are received in the renewable energy and hydrogen sector and are guided according to the National Strategy for an Orderly Transition to Net Zero.