IMF Executive Board Concludes 2024 Article IV Consultation with Oman
IMF News, January 22, 2025
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Bibliographic details
- Published: January 22, 2025
Summary of mission and Board action
- The Executive Board concluded the 2024 Article IV consultation with Oman on January 14 and considered and endorsed the staff appraisal without a meeting on a lapse-of-time basis.
- Press Release No. 25/011.
Recent macroeconomic performance and outlook
- Real GDP growth:
- 2023: 1.2 percent
- First half of 2024 (year on year): 1.9 percent
- Drivers: stronger nonhydrocarbon growth; oil production cuts under OPEC+ agreements weighed on hydrocarbon output.
- Real nonhydrocarbon GDP:
- 2023: 1.8 percent
- First half of 2024: 3.8 percent
- Key expanding sectors: construction, manufacturing, and services.
- Inflation:
- 2023: 1.0 percent
- January–October 2024: 0.6 percent
- Factors: contraction in transport prices and moderation in food inflation.
- Medium-term role of nonhydrocarbon sector:
- Nonhydrocarbon activity set to drive overall growth as sizable committed private sector investments are executed.
Fiscal and external positions
- Overall balances (2024):
- Overall fiscal balance: 6.2 percent of GDP
- Current account balance: 2.4 percent of GDP
- Nonhydrocarbon primary deficit:
- Estimated unchanged in 2024 relative to 2023 despite higher budgeted social spending.
- Government debt:
- Government debt as a share of GDP reached 35 percent in 2024.
- Sovereign credit: Oman’s sovereign credit rating has been upgraded recently to investment grade (as stated).
- Net foreign assets of banks:
- Turned positive by end of 2023 for the first time since 2014.
Banking and financial sector
- Banking sector soundness:
- Profitability recovered to pre-pandemic levels.
- Capital and liquidity buffers are ample.
- Asset quality remains strong.
- Financial sector development priorities:
- Open banking sector to new players and dynamize financial markets.
- Invigorate money markets to establish a short-term yield curve, enabling longer-dated government bond issuance and corporate debt market development.
- Expand role of nonbank financial institutions, including revamping the Social Protection Fund’s investment policy and facilitating inflows from nonresident investors.
- Pursue upgrade of Muscat Stock Exchange to emerging market status.
- Continue AML/CFT reform to mitigate financial integrity risks.
Risks to the outlook
- Downside risks:
- Intensifying geopolitical tensions.
- Global slowdown, particularly in China, affecting trade, tourism, and FDI.
- Lower-than-expected oil prices amid an expected oversupplied global energy market in 2025.
- Slowdown in Oman’s reform implementation.
- Longer-run risk:
- Uncertainty over the speed of the global energy transition.
- Upside scenarios:
- Higher oil prices.
- Acceleration in global growth—including faster-than-expected monetary easing.
- Faster implementation of reforms and investments under Oman Vision 2040.
Executive Board assessment
- Outlook:
- Supported by favorable hydrocarbon revenues and steadfast reform efforts, Oman’s economic outlook remains favorable.
- Nonhydrocarbon growth set to accelerate over the medium term supported by execution of committed private sector investments and higher regional demand.
- Fiscal and current account balances expected to remain in surplus over the medium term, albeit somewhat lower than current levels, weighed down by softening oil prices but supported by rising hydrocarbon production and continued fiscal discipline.
- Uncertainty:
- Outlook subject to elevated uncertainty from oil price volatility, global slowdown risks, and intensifying geopolitical tensions.
Key policy recommendations and reform priorities
- Fiscal policy and institutions:
- Continue prudent fiscal management while implementing the social protection law.
- 2025 budget: preserve fiscal discipline and further lower the nonhydrocarbon primary deficit while maintaining social safety net spending broadly unchanged relative to 2024.
- Accelerate fiscal reforms to entrench fiscal sustainability and ensure intergenerational equity.
- Proceed decisively with:
- Tax administration reform.
- Implementation of the personal income tax law.
- Implementation of Pillar II of the global minimum tax.
- Reduce the tax gap and help re-balance envisaged fiscal adjustment over the medium term.
- Sustain reforms to reduce the cost of electricity generation, transmission, and distribution and adjust tariffs as needed to ensure cost recovery by 2030, along with lifting the fuel price cap.
- Strengthen fiscal institutions:
- Develop the Medium-Term Fiscal Plan (MTFP) into a full-fledged Medium-Term Fiscal Framework (MTFF) and seek high-level endorsement.
- Consider a carefully selected fiscal rule with a well-crafted communication strategy.
- Expedite full implementation of the Treasury Single Account (TSA).
- Advance SOE reforms: governance, transparency, risk management, contingency planning, and reducing state footprint.
- Align fiscal reporting with international standards and expand coverage.
- Develop a sovereign asset and liability management framework.
- Exchange rate and monetary policy:
- The exchange rate peg remains appropriate and credible as a policy anchor.
- Operationalize the Monetary Policy Enhancement Project to improve monetary transmission and deepen money markets.
- Progress on Emergency Liquidity Assistance and collateral frameworks is welcome.
- Strengthen liquidity management framework alongside full TSA implementation and deepening of money and capital markets.
- Banking sector and macroprudential policy:
- Continue strengthening regulatory and supervisory frameworks, including the improved D-SIB framework and restoring the capital conservation buffer to pre-pandemic level.
- Lift the interest rate cap on personal loans and upgrade the credit bureau to improve capital allocation, support pricing of credit risk, enhance access to finance, and improve monetary policy transmission.
- Strengthen the macroprudential toolkit, including introducing a positive countercyclical capital buffer if the credit gap turns positive.
- Financial markets and inclusion:
- Revamp Social Protection Fund’s investment policy and facilitate nonresident investor inflows.
- Pursue actions to develop money markets, government bond market, corporate debt market, and upgrade Muscat Stock Exchange.
- Continue AML/CFT reforms to mitigate financial integrity risks.
- Structural and labor reforms under Oman Vision 2040:
- Sustain implementation of reforms to achieve sustainable, job-rich, private sector-led nonhydrocarbon growth.
- Continue rollout of the new social protection law and labor market reforms supported by the new labor law.
- Tackle remaining bottlenecks: wage gap between public and private sectors; enhance mobility for expatriate workers; empower women in the workforce; reduce the skills gap; scale up support for job seekers.
- Accelerate initiatives to attract investments, expand trade opportunities, empower SMEs, and maintain momentum on climate and digitalization agendas.
Selected economic indicators (extracted from Table 1)
- Oil and gas sector:
- Average crude oil export price (US$/barrel): 2021: 64.3; 2022: 95.4; 2023: 82.3; 2024: 81.3; 2025: 72.8; 2026: 70.2; 2027: 68.6; 2028: 67.6; 2029: 67.0.
- Crude and condensates oil production (millions of barrels/day): 2021: 0.971; 2022: 1.064; 2023: 1.049; 2024: 0.997; 2025: 1.002; 2026: 1.032; 2027: 1.095; 2028: 1.140; 2029: 1.176.
- Natural gas production (millions of cubic meters per day): 2021: 132.2; 2022: 137.2; 2023: 142.5; 2024: 149.1; 2025: 152.3; 2026: 155.5; 2027: 159.2; 2028: 163.0; 2029: 166.9.
- National accounts:
- Nominal GDP (US$ billions): 2021: 87.3; 2022: 109.9; 2023: 105.9; 2024: 106.8; 2025: 107.6; 2026: 111.5; 2027: 116.9; 2028: 122.5; 2029: 128.6.
- Nominal GDP (Omani rials, billions): 2021: 33.6; 2022: 42.2; 2023: 40.7; 2024: 41.1; 2025: 41.4; 2026: 42.9; 2027: 44.9; 2028: 47.1; 2029: 49.5.
- Real GDP (annual percentage change): 2021: 2.6; 2022: 8.0; 2023: 1.2; 2024: 3.6; 2025: 4.4; 2026: 4.1; 2027: 3.8.
- Real hydrocarbon GDP: 2021: 3.2; 2022: 8.7; 2023: -0.1; 2024: -3.1; 2025: 1.0; 2026: 2.9; 2027: 5.4; 2028: 3.0.
- Real nonhydrocarbon GDP: 2021: 2.3; 2022: 7.7; 2023: 1.8; 2024: 3.3; 2025: 3.4; 2026: 3.9; 2027: 4.0; 2028: 4.2.
- Consumer prices (average): 2021: 1.7; 2022: 2.5; 2023: 0.8; 2024: 1.5; 2025: 2.0.
- Investment and saving (percent of GDP):
- Gross capital formation: 2021: 27.9; 2022: 27.3; 2023: 26.7; 2024: 26.0; 2025: 26.5; 2026: 28.3.
- Public investment (percent of GDP): 2021: 7.5; 2022: 7.1; 2023: 7.3; 2024: 6.8.
- Private investment (percent of GDP): 2021: 19.4; 2022: 20.2; 2023: 19.2; 2024: 19.7; 2025: 20.5; 2026: 21.5.
- Gross national savings: 2021: 22.3; 2022: 31.3; 2023: 29.2; 2024: 28.4; 2025: 27.8; 2026: 28.1.
- Central government finances:
- Revenue and grants (percent of GDP): 2021: 33.3; 2022: 34.3; 2023: 34.2; 2024: 29.7; 2025: 28.8; 2026: 27.7.
- Hydrocarbon revenue (percent of GDP): 2021: 26.2; 2022: 33.7; 2023: 25.7; 2024: 25.4; 2025: 20.8; 2026: 20.3; 2027: 20.0; 2028: 19.6; 2029: 18.9.
- Nonhydrocarbon and grants (percent of GDP): 2021: 8.6; 2022: 8.8; 2023: 8.9.
- Expenditure (percent of GDP): 2021: 36.5; 2022: 30.9; 2023: 27.5; 2024: 28.0; 2025: 25.6; 2026: 24.5; 2027: 23.6.
- Current expenditure (percent of GDP): 2021: 33.0; 2022: 24.1; 2023: 25.2; 2024: 23.7; 2025: 22.8; 2026: 21.8; 2027: 21.0.
- Capital expenditure (percent of GDP): 2021: 3.5; 2022: 3.1; 2023: 2.8; 2024: 2.7.
- Overall balance (Net lending/borrowing, percent of GDP): 2021: -3.2; 2022: 10.5; 2023: 6.9; 2024: 6.2.
- Nonhydrocarbon primary balance (percent of nonhydrocarbon GDP): 2021: -31.9; 2022: -31.7; 2023: -29.0; 2024: -29.1; 2025: -26.8; 2026: -25.3; 2027: -23.8; 2028: -22.2; 2029: -20.6.
- Central government debt (percent of GDP): 2021: 61.9; 2022: 41.7; 2023: 37.5; 2024: 34.9; 2025: 34.7; 2026: 31.5; 2027: 30.2; 2028: 30.0.
- Monetary sector indicators:
- Net foreign assets: 2021: -0.8; 2022: 35.5; 2023: 9.6; 2024: 9.3.
- Net domestic assets: 2021: -1.4; 2022: 6.5; 2023: -2.0; 2024: 2.2; 2025: 5.7.
- Credit to the private sector (annual percent change): 2021: 4.7; 2022: 3.7; 2023: 4.8; 2024: 5.3; 2025: 5.9.
- Broad money (annual percent change): 2021: 4.6; 2022: 0.6; 2023: 13.1; 2024: 5.1.
- External sector (US$ billions):
- Exports of goods: 2021: 44.3; 2022: 66.1; 2023: 59.0; 2024: 62.4; 2025: 61.2; 2026: 62.5; 2027: 64.8; 2028: 67.2; 2029: 68.9.
- Oil and gas exports (US$ billions): 2021: 25.9; 2022: 43.1; 2023: 35.8; 2024: 34.5; 2025: 35.2; 2026: 35.7; 2027: 36.2.
- Imports of goods (US$ billions): 2021: 38.6; 2022: 38.7; 2023: 39.6; 2024: 40.5; 2025: 41.3; 2026: 42.5.
- Current account balance (US$ billions): 2021: -4.8; 2022: 1.4; 2023: 0.9; 2024: 2.4.
- Current account balance (percent of GDP): 2021: -5.5; 2022: 1.3; 2023: 2.1.
- Central Bank gross reserves (US$ billions): 2021: 17.6; 2022: 17.5; 2023: 19.0; 2024: 21.1.
- Reserves in months of next year's imports: 2021: 4.5; 2022: 5.0; 2023: 5.6.
- Total external debt (percent of GDP): 2021: 79.8; 2022: 70.0; 2023: 65.6; 2024: 63.4; 2025: 63.1; 2026: 62.0; 2027: 61.5; 2028: 61.4.
International Monetary Fund press release: IMF Executive Board Concludes 2024 Article IV Consultation with Oman.
