IMF Staff Concludes Staff Visit to Oman

IMF News, May 13, 2024

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A staff team from the International Monetary Fund (IMF), led by Mr. Cesar Serra, visited Muscat, Oman, during April 30-May 8, 2024, to discuss economic and financial developments, the outlook, and the country’s policy priorities.
End-of-Mission press release: views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion.

Real GDP growth:
- 2023: 1.3 percent (driven by expansion of nonhydrocarbon activities).
- 2024 (projected): 0.9 percent (moderate growth, reflecting extended oil production cuts to the first half of 2024).
- 2025 (projected): 4.1 percent (accelerating, supported by a rebound in hydrocarbon activity following expected relaxation of OPEC+ quotas).
Nonhydrocarbon growth:
- 2023: 2.1 percent.
- 2024 (projected): 2.6 percent.
- 2025 (projected): 3.2 percent.
Inflation:
- Average headline inflation decelerated from 0.9 percent in 2023 to nil during January-March 2024 (year-over-year), reflecting easing of core, food, and transport inflation.

Fiscal balance:
- 2023: surplus of 6.6 percent of GDP.
- Forecast: remain in surplus over the medium term, supported by comfortable hydrocarbon receipts, increasing nonhydrocarbon revenues, and continued fiscal discipline.
Central government debt:
- 2023: 36.5 percent of GDP (reduced from 40.9 percent in 2022).
- Net debt reduction in 2023: $6.1 billion (government used part of the fiscal surplus to prepay debt).
State-owned enterprises (SOEs) debt:
- Stabilized at around 31 percent of GDP.
- Oman Investment Authority’s SOEs reform agenda: 9 divestments completed in 2023 with proceeds amounting to about $3 billion.

Current account balance:
- 2023: surplus of 1.4 percent of GDP.
- Projected: set to remain in surplus over the medium term.
Gross international reserves held by the Central Bank of Oman:
- 2023: $17.5 billion (4.1 months of prospective goods and services imports).
- Reserves supported by a surge in Foreign Direct Investment.
Banks’ net foreign asset position turned positive in December 2023 for the first time since 2014, due to rising investments in foreign securities.

Banking sector resilience:
- Bank capital and liquidity ratios and profitability continue at comfortable levels.
- Asset quality: strong.
- Credit to the private sector: continued to expand.
- Banks’ net foreign asset position: turned positive in December 2023.

Near- to medium-term outlook: favorable; risks broadly balanced.
Upside risks:
- Surge in oil prices (driven by supply and demand imbalances).
- Accelerated reforms under Oman Vision 2040.
- Committed investments from regional partners.
Downside risks:
- Further intensification of geo-political tensions in the region.
- An abrupt global slowdown, particularly in China.
- Higher-for-longer global interest rates.

Progress under Oman Vision 2040:
- Social protection and labor laws being rolled out.
- SOEs divestment, deleveraging, and other SOEs reforms progressing as planned.
- Climate-related investments on track to achieve renewable energy and green hydrogen targets over the medium term.
Authorities’ priorities going forward:
- Enhancing tax administration.
- Continuing rationalizing fiscal expenditures.
- Strengthening the medium-term fiscal framework.
- Modernizing the monetary policy toolkit.
- Deepening financial markets and supporting small and medium enterprises funding.
- Accelerating digitalization.
Reform objectives: accelerate diversification towards a greener, more inclusive, and knowledge-based economy.

IMF Communications Department — Press Release No. 24/154 (May 13, 2024); statement issued by Mr. Cesar Serra at the conclusion of the mission.