Oman’s economic recovery continues: IMF affirms

Muscat: The Sultanate of Oman has welcomed the International Monetary Fund 2023 Article IV Consultation Report, approved by IMF Executive Board on Tuesday.

The report was issued following a series of consultations between IMF experts and over 20 government and private entities as part of the annual periodic consultations under Article IV of the Articles of Agreement of the IMF.

At the level of domestic economy performance,the report indicates that the Sultanate of Oman’s economic recovery continues, supported by favourable oil prices and sustained reform momentum. This manifested in the growth of the real GDP by 4.3 percent in 2022, primarily driven by the growth of hydrocarbon and non-hydrocarbon sectors, despite its slowdown in the first half of 2023 on the back of OPEC+-related oil production cuts.

In addition, non-hydrocarbon growth accelerated from 1.2 percent in 2022 to 2.7 percent in the first half of 2023, supported by recovering agricultural, forestry, fisheries, construction activities and robust services sector.

In terms of domestic prices levels, the report highlights the factors that contributed to containing inflation, which significantly receded from 2.8 percent in 2022 to 1.2 percent during January-September 2023. These include subsidies on basic food items, caps on domestic petroleum prices and the peg to a strong US Dollar.

As for the internal and external balances, the IMF report praised the Sultanate of Oman’s prudent fiscal management, which helped to turn fiscal and current account balances into surpluses in 2022 along with non-hydrocarbon primary deficit remaining on a downward trajectory. In addition to the improvement in the current balance to a surplus of 2.8 percent of the GDP in 2023, central government debt as a share of GDP declined from about 68 percent in 2020 to 38 percent in 2023, supported by higher oil prices, economic growth and the prudent fiscal measures adopted by the government, which reflected in the Sultanate of Oman's sovereign credit rating upgrade to one notch below investment grade.

Moreover, the IMF praised the resilient banking sector in the Sultanate of Oman, with profitability recovering to pre-pandemic levels. The report also indicates that bank capital and liquidity ratios are well above regulatory requirements, maintaining high-quality assets. The report further praised the good performance achieved by the sector in buffering the recent shocks, as stress tests suggest that banks are resilient to credit and liquidity turmoil.

The IMF stressed the need to accelerate Oman Vision 2040 reform plans, and promote investments from regional partners to sustain growth momentum. Furthermore, the report highlights a number of risks that could impact economic projections, including the decline in oil prices from the economic deceleration in China and the slowdown in the implementation of the reform agenda as well as the indirect spillovers of the ongoing conflict in the region on the Omani economy.