The International Monetary Fund (IMF) mission concluded its discussions relating to the 2022 Article IV Consultation with the authorities of the Sultanate of Oman, which lasted from September 20 to October 4. The IMF staff noted their appreciation of the Omani authorities’ cooperation, acknowledging the efforts made by Oman to face the various global changes.
During the 15-day mission, the IMF staff discussed recent macroeconomic developments, economic outlook, and several other topics related to the fiscal and monetary policies and government measures taken to mitigate the economic and financial repercussions.
Regarding the outlook, the mission in its concluding statement indicated that “overall real GDP growth rebounded from -3.2 per cent in 2020 to 3.0 per cent in 2021, and is projected at 4.3 per cent in 2022, supported by increased hydrocarbon production and continued recovery of non-hydrocarbon economic activities. Moreover, rebounding economic activity and elevated global inflationary pressures are expected to push up average inflation to 3 per cent in 2022, due to increased inflationary pressures from higher global food and energy prices, more persistent disruption in global supply chains, pressures to spend the hydrocarbon windfalls, and climate-related events”.
Furthermore, the mission stressed that high oil prices and fiscal consolidation under Oman’s Medium-Term Fiscal Plan (MTFP) have improved fiscal and external balances considerably. The overall public finance balance improved by 12.8 percentage points of GDP to a deficit of 3.2 per cent in 2021. Fiscal and external surpluses are expected in 2022, public debt declined to 62.9 per cent of GDP in 2021, and it is expected to decline to about 44 per cent of GDP in 2022.
The IMF mission also agreed that the banking system has weathered the recent shocks relatively well. Financial soundness indicators appear healthy, benefiting from the strong buffers before entering the crisis.
The mission also noted that Oman continues to press forward with a broad array of structural reforms under Oman Vision 2040, with the goal to achieve the strong, job-rich and sustainable private sector-led growth needed to offer opportunities to job-seekers and ensure higher living standards for future generations. Key priorities include enhancing labour market flexibility, boosting women employment, improving the business environment, advancing SOE reforms and governance, leveraging digitalisation and continuing the implementation of green initiatives.
In a final note, the mission perceived that uncertainties continue to cloud the outlook of Oman. On the upside, the outlook could be bolstered by hydrocarbon windfalls, implementation of structural reforms under Vision 2040 and the realisation of investment projects from regional partners.
