Muscat – The International Monetary Fund (IMF) has praised Oman’s efforts to deal with the COVID-19 crisis and revive the economy after the pandemic.
The IMF said rising oil prices, fiscal consolidation measures and progress in structural reforms are supporting a post-pandemic economic recovery in the sultanate.
An IMF mission, led by Daniel Kanda, conducted discussions in Muscat for the 2022 Article IV consultation for Oman from September 20 to October 4, 2022.
In a statement issued after the IMF mission to Oman, Kanda said the sultanate’s economic recovery was gaining momentum, supported by the revival of the hydrocarbon sector and the easing of social restrictions related to COVID-19.
“High oil prices, continued fiscal consolidation under the authorities’ medium-term fiscal plan, and determined implementation of structural reforms under Oman Vision 2040 are expected to generate fiscal and external surpluses and support higher growth over the medium term,” he said.
The IMF now forecasts Oman’s economic growth of 4.3% for 2022, supported by an increase in hydrocarbon production and a continued recovery in non-oil economic activity.
“The Omani authorities continue to advance a wide range of structural reforms under the Oman Vision 2040, with the aim of achieving the strong, job-rich and sustainable growth, led by the private sector, necessary to deliver opportunities for job seekers and ensuring a higher standard of living for future generations,” Kanda said.
“Oman’s top priorities include improving labor market flexibility, boosting female employment, improving the business environment, advancing public enterprise reforms, digitalization and the continued implementation of green initiatives,” he added.
The IMF noted that high oil prices and fiscal consolidation under the authorities’ medium-term fiscal plan have significantly improved Oman’s fiscal and external balances.
“The overall central government fiscal balance improved by 12.8 percentage points of GDP to a deficit of 3.2% in 2021, largely due to higher oil revenues, lower expenditure and the introduction of VAT. Fiscal and external surpluses are expected in 2022 and the medium term,” Kanda said.
He noted that Oman’s government debt fell to 62.9% of GDP in 2021 and is expected to fall to around 44% of GDP in 2022.
Commenting on inflation, Kanda said Oman’s consumer price inflation has been contained so far, partly reflecting administered prices and caps on some fuel prices.
“The rebound in economic activity and high global inflationary pressures are expected to push average inflation to 3% in 2022, given the relatively high import dependency. The direct impact on the Omani economy of the war in Ukraine has been limited.
The IMF, however, warned that heightened global uncertainties, particularly due to the war in Ukraine, continue to cloud the outlook, with downside risks predominating in the near term.