Oman's growth outlook is favourable: IMF

The International Monetary Fund (IMF) on Monday said that Oman's near- to medium-term growth outlook is favourable, with risks to the outlook being broadly balanced.

An IMF staff team, led by Cesar Serra, visited Muscat from April 30 to May 8, 2024, to discuss economic and financial developments, the outlook, and the country’s policy priorities. At the conclusion of the mission to Oman, Serra issued a statement.

In his statement, Serra said, “The near- to medium-term outlook is favourable, and risks to the outlook are broadly balanced. On the upside, growth and fiscal and external positions would be strengthened by a surge in oil prices, driven by supply and demand imbalances, and accelerated reforms under Oman Vision 2040, along with committed investments from regional partners. Downside risks to the outlook stem from further intensification of geopolitical tensions in the region, an abrupt global slowdown, particularly in China, and higher-for-longer global interest rates.”

He noted that Oman’s economic activity continues to expand, while inflation remains low. Despite OPEC+ oil production cuts, the sultanate's real GDP grew by 1.3% in 2023, driven by the expansion of nonhydrocarbon activities.

“Economic growth is expected to remain moderate at 0.9% in 2024, due to extended oil production cuts in the first half of this year before accelerating to 4.1% in 2025, supported by a rebound in hydrocarbon activity following the expected relaxation of OPEC+ quotas,” Serra added.

According to the IMF, Oman's non-hydrocarbon growth is projected to increase to 2.6% in 2024 and 3.2% in 2025 – up from 2.1% in 2023 – driven by continued reforms and investment projects. Average headline inflation decelerated further from 0.9% in 2023 to nil during January-march 2024 (year-overyear), reflecting continued easing of core, food, and transport inflation.

Serra noted that favourable oil prices and sustained reform efforts continue to shore up Oman's fiscal and external positions. “The fiscal balance recorded a surplus of 6.6% of GDP in 2023 and is forecast to remain in surplus over the medium term, supported by comfortable hydrocarbon receipts, increasing non-hydrocarbon revenues, and continued fiscal discipline.”

He acknowledged that the Omani government's debt as a share of GDP was further reduced to 36.5% in 2023 from 40.9% in 2022, as the government continued to use part of the fiscal surplus to prepay its debt.

According to Serra, the sultanate's banking sector remains resilient. Bank capital and liquidity ratios, as well as profitability, continue at comfortable levels amid strong asset quality.

“Omani banks’ net foreign asset position turned positive in December 2023 for the first time since 2014 due to rising investments in foreign securities, while credit to the private sector continued to expand,” he added.

Economic growth is expected to remain moderate at 0.9% in 2024, due to extended oil production cuts in the first half of this year before accelerating to 4.1% in 2025

CESAR SERRA