IMF staff concludes 2019 Article IV visit to Sultanate
Times of Oman
MUSCAT: An International Monetary Fund (IMF) team led by Stéphane Roudet visited Muscat from March 26 to April 8 to hold the 2019 Article IV consultation discussions with Oman.
At the conclusion of the visit, Roudet said: “Economic activity is gradually recovering. After reaching a low of 0.5 per cent in 2017, real non-hydrocarbon gross domestic product (GDP) growth is estimated to have increased to 1.5 per cent last year, reflecting higher confidence driven by a rebound in oil prices and higher government spending.”
“Oil and gas production increases brought overall real gross domestic product growth to 2.2 per cent. Non-hydrocarbon growth is projected to increase gradually over the medium term, reaching about 4 per cent, assuming efforts to diversify the economy continue,” he added.
Preliminary budget execution data indicate an improvement in the overall fiscal balance last year. The fiscal deficit is estimated to have declined to about 9 per cent of GDP from 13.9 per cent of GDP in 2017, reflecting higher oil revenues.
Nonetheless, budget implementation remained challenging, with some spending overruns and tax revenue underperformance compared to the budget. In addition, after several years of improvement, the underlying (non-oil) primary balance deteriorated due to higher spending.
“The fiscal deficit is projected to decline to about 8 per cent of GDP this year, as the impact of lower oil prices is more than offset by a decline in spending, one-off revenue, and implementation of a new excise tax on selected products. Further efforts to curtail spending and the planned introduction of VAT could reduce the deficit by another two percentage points of GDP over the next two years,” Roudet said.
“However, thereafter, assuming the IMF’s projected gradual decline in oil price and production materialises, and given the expected increase in interest payments, the fiscal deficit would increase again, pushing government and external debt up and increasing vulnerability to shocks,” he added.
Deeper fiscal consolidation is therefore important to ensure fiscal and external sustainability. The authorities are encouraged to lay out and implement an ambitious medium-term fiscal adjustment plan, based on reforms to tackle current spending rigidities—particularly on the wage bill and subsidies—streamline public investment, and raise non-hydrocarbon revenue, he said.
Full story @ timesofoman.com/business