IMF Staff Concludes 2022 Article IV Mission to Oman

IMF News, October 5, 2022

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Press Release No. 22/337 — October 5, 2022.
An IMF mission, led by Mr. Daniel Kanda, conducted discussions in Muscat for the 2022 Article IV Consultation from September 20 to October 4, 2022.
End-of-Mission press release conveys preliminary findings; views are those of IMF staff and do not necessarily represent the IMF’s Executive Board.
IMF staff will prepare a report based on the mission’s preliminary findings that, subject to management approval, will be presented to the IMF Executive Board for discussion and decision.

"Oman’s economic recovery is gaining traction, supported by revival in the hydrocarbon sector and the relaxation of Covid-19 social restrictions."
GDP growth:
- Rebounded from -3.2 percent in 2020 to 3.0 percent in 2021.
- Projected at 4.3 percent in 2022, supported by increased hydrocarbon production and continued recovery of non-hydrocarbon economic activity.
Inflation:
- CPI inflation has been contained thus far, partly reflecting administered prices and caps on selected fuel prices.
- Average inflation is expected to rise to 3 percent in 2022 given the relatively high dependence on imports and large weight of tradable items in the CPI basket.
"Direct spillovers on the Omani economy from the war in Ukraine have been limited."

Fiscal improvement driven by high oil prices and fiscal consolidation under the authorities’ Medium-Term Fiscal Plan (MTFP).
Central government balance:
- Improved by 12.8 percentage points of GDP to a deficit of 3.2 percent in 2021, largely due to higher hydrocarbon revenue, expenditure restraint, and the introduction of VAT.
- Fiscal and external surpluses are expected in 2022 and over the medium term.
Central government debt:
- Declined to 62.9 percent of GDP in 2021.
- Expected to decline to about 44 percent of GDP in 2022.
Recommendation: "Steadfast implementation of MTFP and further strengthening fiscal frameworks would reinforce fiscal sustainability."

"Benefiting from prudent oversight of the Central Bank of Oman and strong buffers, the banking system has weathered the recent shocks relatively well."
Financial soundness indicators appear healthy, benefiting from the strong buffers before entering the crisis.
Private sector credit growth has remained subdued.
Assessment: Financial system risks are low, but close monitoring of banks’ asset quality remains important.

Authorities continue implementation of structural reforms under Oman Vision 2040 aimed at "strong, job-rich, and sustainable private sector-led growth."
Key priorities listed by IMF staff:
- Enhancing labor market flexibility.
- Boosting female employment.
- Improving the business environment.
- Advancing SOE reforms.
- Leveraging digitalization.
- Continuing the implementation of green initiatives.

"Uncertainties continue to cloud the outlook, with downside risks, notably from global sources, dominating in the short run."
Upside factors:
- Higher-than-expected hydrocarbon windfalls.
- Accelerated implementation of structural reforms under Vision 2040.
- Realization of investment projects from regional partners.
Downside risks:
- Uncertainty about the war in Ukraine and its impact on the global economy and oil prices.
- A renewed flare-up of COVID-19 infections.
- Tighter-than-expected global financial conditions.
- Increased inflationary pressures from higher global food and energy prices.
- More persistent disruption in global supply chains.
- Pressures to spend the hydrocarbon windfalls.
- Climate-related events.

"The IMF staff team would like to thank the Omani authorities and other counterparts for the open and candid discussions and their warm hospitality."

IMF Communications Department — MEDIA RELATIONS