IMF Executive Board Concludes 2019 Article IV Consultation with Oman
IMF News, July 3, 2019
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Bibliographic details
- Published: July 3, 2019
Overview
- Date: July 3, 2019
- Since the 2014 oil price shock, policy focus: strengthening the fiscal position, enhancing private sector‑led growth and employment, and encouraging diversification.
- Recovery drivers in 2018: rebound in oil prices and increased oil and gas production.
Economic activity and projections
- Real non-hydrocarbon GDP growth: reached a low of ½ percent in 2017 and increased to about 1½ percent in 2018.
- Real hydrocarbon GDP growth: estimated 3.1 percent in 2018.
- Overall real GDP growth: 2.2 percent in 2018.
- Non-hydrocarbon growth projection: reach about 4 percent over the medium term, assuming continued diversification efforts.
- Selected projections (annual real GDP growth, annual percentage change):
- 2018: 2.2
- 2019: 0.3
- 2020: 5.9
- 2021: 2.1
- 2022: 0.9
- 2023: 1.4
- 2024: 1.7
Fiscal position and public debt
- Fiscal deficit estimated to have declined to about 9 percent of GDP in 2018 from 13.9 percent of GDP in 2017.
- Gross government debt increased by 7 percent of GDP in 2018 to 53.5 percent of GDP.
- Central government finances (percent of GDP):
- Revenue and grants: 37.1 in 2018; projected 37.2 in 2019; 36.3 in 2020.
- Hydrocarbon revenue: 29.2 in 2018; 27.7 in 2019; 27.6 in 2020.
- Nonhydrocarbon and grants: 10.4 in 2018; 10.8 in 2019; 11.0 in 2020.
- Expenditure: 46.3 in 2018; 44.3 in 2019; 43.3 in 2020.
- Current expenditure: 36.0 in 2018; 34.8 in 2019; 35.1 in 2020.
- Capital expenditure: 8.2 in 2018; 8.0 in 2019.
- Overall balance (Net lending/borrowing): -9.0 in 2018; -7.2 in 2019; -7.0 in 2020.
- Non-hydrocarbon primary balance (in percent of non-oil GDP):
- 2018: -48.6
- 2019: -45.4
- 2020: -42.2
- 2021: -38.5
- 2022: -36.6
- 2023: -34.7
- 2024: -32.9
- Total government debt trajectory:
- 2018: 53.5
- 2019: 58.7
- 2020: 61.1
- 2021: 62.2
- 2022: 69.3
- 2023: 73.1
External sector and reserves
- Current account deficit estimate for 2018: -3.7 (in billions of U.S. dollars) and percent of GDP: -4.7.
- Current account projections (percent of GDP): 2019: -5.9; 2020: -4.0; 2021: -3.8; 2022: -4.9; 2023: -6.0; 2024: -6.7.
- Exports of goods (US$ billions):
- 2018: 41.6
- 2019: 39.9
- 2020: 41.8
- 2021: 43.9
- 2022: 46.5
- Oil and gas component of exports (US$ billions):
- 2018: 25.5
- 2019: 24.3
- 2020: 23.9
- Imports of goods (US$ billions): 2018: -23.5; 2019: -24.2; 2020: -25.1; 2021: -26.3; 2022: -27.7; 2023: -29.4; 2024: -31.3.
- Central Bank gross reserves (in months of next year's imports of goods and services):
- 2016: 5.5
- 2017: 5.8
- 2018: 5.2
- 2019: 4.4
- 2020: 4.3
Financial sector
- Private sector credit growth moderated: 5.6 percent in 2018.
- Banks: high capitalization, low non-performing loans, and strong liquidity buffers.
- Interest rates: increased due to U.S. monetary policy normalization.
- Directors urged continued attention to regulation and supervision and further efforts in enhancing the AML/CFT framework to support correspondent banking relationships.
Executive Board assessment and policy recommendations
- Directors welcomed steps to enhance private sector growth, reduce spending growth, diversify government revenue, and improve the business environment.
- Concerns: public and external vulnerabilities have continued to grow; sovereign credit rating downgrades and increases in sovereign risk premia were noted.
- Fiscal policy recommendations:
- Deeper fiscal adjustment to maintain confidence and ensure fiscal and external sustainability.
- Expeditious introduction of VAT.
- Measures to adjust government expenditure.
- Lay out and implement an ambitious medium‑term fiscal adjustment plan based on:
- Reforms to tackle current spending rigidities.
- Streamlining public investment.
- Raising non‑hydrocarbon revenue.
- Prioritize measures that limit the impact on growth and place more of the adjustment on those who can best shoulder it.
- Enhance fiscal governance and transparency; a formal medium‑term fiscal framework recommended to anchor consolidation and limit implementation risks.
- Authorities’ plan to carry out a Public Expenditure Review with World Bank support described as useful.
- Exchange rate policy:
- Exchange rate peg to the US dollar "had delivered low and stable inflation and remained appropriate."
- Recommended fiscal adjustment seen as key to bringing the external position more in line with fundamentals and supporting the currency peg.
- Structural reforms:
- Continue implementation of the Tanfeedh Program focusing on economic diversification and job creation.
- Address labor market rigidities by better aligning public‑sector compensation with the private sector and addressing skills mismatches through higher quality education and training.
- Encourage further SME development, including better access to finance, to raise productivity.
Selected key indicators (highlights from data table)
- Oil and gas total production (US$ billions): 2015: 21.7; 2016: 16.0; 2017: 18.6; 2018: 26.6; 2019 (Proj.): 23.7.
- Average crude oil export price (US$/barrel): 2015: 56.5; 2016: 40.1; 2017: 51.3; 2018: 69.7; 2019 (Proj.): 65.1.
- Crude oil production (millions of barrels/day): 2015: 0.98; 2016: 1.00; 2017: 0.97; 2018: 1.09; 2019 (Proj.): 1.12.
- Nominal GDP (US$ billions): 2018: 79.3; 2019 (Proj.): 77.6; 2020 (Proj.): 80.3.
- Consumer prices (average): 2018: 1.8; 2019 (Proj.): 3.8; 2020 (Proj.): 3.4.
- Gross capital formation (percent of GDP): 2018: 31.5; 2019 (Proj.): 31.8; 2020 (Proj.): 32.0.
- Gross national savings (percent of GDP): 2018: 26.8; 2019 (Proj.): 25.9; 2020 (Proj.): 28.0.
- Total external debt (percent of GDP): 2018: 80.2; 2019 (Proj.): 86.8; 2020 (Proj.): 91.8.
- Nominal effective exchange rate (2010=100): 2015: 116; 2016: 117; 2017: 119; 2018: 118.
IMF Executive Board press release, July 3, 2019.
