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Oman’s economy is on a steady growth trajectory, supported by robust reforms under Oman Vision 2040, according to the International Monetary Fund (IMF). In its End-of-Mission press release following the 2024 Article IV consultation held in Muscat from October 30 to November 13, the IMF praised the country’s progress in economic diversification, fiscal management, and social reforms.
Led by César Serra, the IMF team highlighted that Oman’s economic growth stood at 1.2% in 2023, rising to 1.9% year-on-year in the first half of 2024. While oil production cuts under the OPEC+ agreements weighed on hydrocarbon revenues, the nonhydrocarbon sector grew significantly—1.8% in 2023 and 3.8% in the first half of 2024—driven by construction, manufacturing, and services.
Inflation remained low at 0.6% from January to September 2024, compared to 0.9% in 2023. Fiscal and current account surpluses persisted, alongside a notable reduction in public sector debt. These improvements contributed to Oman’s recent upgrade to investment-grade status by major credit rating agencies.
REFORM MOMENTUM KEY TO ECONOMIC SUSTAINABILITY
The IMF emphasised the importance of sustaining reform efforts to ensure fiscal sustainability and economic diversification. Oman has made strides in enhancing its social safety nets and implementing a new social protection law. Labour market reforms are underway, aimed at boosting flexibility and empowering SMEs.
The IMF also noted progress in overhauling state-owned enterprises (SOEs) through the Oman Investment Authority, improving the business environment, and attracting large-scale investments. Significant advancements in renewable energy projects and digital transformation further support Oman’s diversification agenda.
FAVOURABLE ECONOMIC OUTLOOK WITH RISKS
The IMF projected Oman’s growth to remain at 1.2% in 2024 due to ongoing OPEC+-related oil production curbs but anticipates a rebound starting in 2025, bolstered by higher hydrocarbon production and continued nonhydrocarbon growth. Fiscal and current account surpluses are expected to remain, though at slightly reduced levels, given potential oil price declines.
However, the IMF warned of elevated uncertainties, including oil price volatility, global economic slowdowns, and geopolitical tensions, which could pose risks to the outlook.
FISCAL AND MONETARY REFORMS ADVANCE
Prudent fiscal management remains a cornerstone of Oman’s reform strategy. The IMF noted that the nonhydrocarbon primary deficit as a share of nonhydrocarbon GDP is projected to remain stable in 2024, despite higher energy subsidies and increased social transfers.
Ongoing efforts to raise nonhydrocarbon revenues, reform tax policies, and phase out untargeted subsidies are critical for freeing up resources for diversification-focused investments. Strengthening fiscal institutions and rolling out a medium-term fiscal framework are also priorities to enhance fiscal credibility.
On the monetary front, Oman’s exchange rate peg continues to serve as a credible policy anchor. The banking sector remains sound, with profitability, capital, and liquidity levels recovering to pre-pandemic levels. The IMF encouraged further financial market development and leveraging digitalisation to support private-sector growth.
OMAN VISION 2040 IN FOCUS
The IMF commended Oman’s commitment to its Vision 2040 objectives, including initiatives to scale up renewable energy, reduce electricity generation costs, and foster the green hydrogen economy. The digital transformation agenda is also advancing, creating a solid foundation for long-term growth.
The IMF expressed its gratitude to Omani authorities for their cooperation and hospitality, acknowledging their decisive reform efforts to bolster economic resilience and diversification.