IMF Staff Concludes Staff Visit to Oman

IMF News, June 19, 2023

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Real GDP grew by 4.3 percent in 2022, primarily driven by a strong expansion of the hydrocarbon sector.
Economic growth projections:
- 2023: 1.3 percent
- 2024: 2.7 percent
Non-hydrocarbon growth:
- 2022: 1.2 percent
- 2023 projection: 2 percent
- 2024 projection: 2.5 percent
Average headline inflation:
- 2022 (year-over-year): 2.8 percent
- January–April 2023 (year-over-year): 1.6 percent
Factors cited for the 2023 slowdown and 2024 rebound:
- Oil production cuts by OPEC+
- Recovering but still subdued construction activity
- A slowdown in global economic activity
- Tighter financial conditions
- Lower food inflation and a stronger US dollar (inflation drivers)

Fiscal balance:
- Fiscal balance reached a surplus of 7.5 percent of GDP in 2022.
- Expected to remain in surplus over the medium term on the back of favorable oil revenues and fiscal measures under the authorities’ Medium-Term Fiscal Plan.
Central government debt:
- 2021: 61.3 percent of GDP
- 2022: 40 percent of GDP
- Decline attributed to use of oil windfall to repay government debt.
State-owned enterprises (SOEs) debt:
- 2021: 40.7 percent of GDP
- 2022: 28.8 percent of GDP
- Decline attributed to asset divestments, improved performance, and debt repayments; risks mitigated by substantial assets under Oman Investment Authority’s management and ongoing reforms.
Current account:
- 2022: surplus of 5.2 percent of GDP (first surplus since 2014).
- Projected to remain in surplus over the medium term.
Gross international reserves held by the Central Bank of Oman:
- $17.6 billion in 2022 (4.7 months of prospective imports).

The banking sector remains sound.
Profitability has recovered from pandemic lows.
Banks display ample capital and liquidity buffers.
Asset quality remains strong while credit to the private sector continues to expand.

Upside risks:
- Accelerated production at the Duqm refinery project.
- Another surge of oil prices—potentially triggered by supply and demand imbalances.
- An acceleration of Vision 2040 reform plans.
- A rise in foreign direct investments from regional partners.
Downside risks:
- A sharp decline in oil prices—due to a severe and protracted global economic slowdown.
- Lower demand for hydrocarbons—due to a faster-than-expected global energy transition.
- Pressures to spend the oil windfall.

Continue implementation of structural reforms to diversify the Omani economy and boost prospects for strong, inclusive, and green non-hydrocarbon growth.
Priority areas identified:
- Allowing for greater labor market flexibility
- Enhancing social protection and insurance
- Improving tax collection efficiency
- Strengthening medium-term fiscal frameworks
- Enhancing the performance and transparency of the SOE sector
- Creating an investor-friendly business environment
- Accelerating the pace of digitalization
- Developing the financial sector
- Investing in green energy to help address climate challenges and leverage the global energy transition

IMF staff team visit: Muscat, Oman, during June 6-14, 2023.
Mission leader: Mr. Cesar Serra.
Press release date: June 19, 2023; Press Release No. 23/217.
End-of-Mission press release note: The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion.

IMF staff team statement as provided in the End-of-Mission press release.