Oman’s economic recovery is gaining traction and is expected to grow 4.3% through 2022, the IMF said recently at the conclusion of a staff mission.
“Strong vaccination efforts have enabled the easing of all social distancing restrictions. Total GDP growth rebounded from -3.2% in 2020 to 3.0% in 2021 and is forecast at 4.3% in 2022, supported by increased hydrocarbon production and a continued recovery in non-hydrocarbon economic activity ‘ the multilateral agency said in a statement on Wednesday.
High oil prices and fiscal consolidation under the authorities’ medium-term budget plan (MTFP) have significantly improved the fiscal and external balances. The central government’s overall balance improved by 12.8 basis points of GDP to a deficit of 3.2% in 2021, mainly due to higher oil revenues, spending restraint and the introduction of VAT, it said.
Public finances improved and budget and balance of payments surpluses are expected in 2022. Central government debt fell to 62.9% of GDP in 2021 and is expected to fall to about 44% of GDP in 2022, the fund said.
Inflation in Oman has been contained through administered prices and caps on selected fuel prices. However, the recovery in economic activity and higher global inflationary pressures are expected to push Oman’s average inflation rate to 3% by 2022, “given the relatively high reliance on imports and the heavy weight of tradable items in the CPI basket”.
The GCC member, which has initiated a series of structural reforms as part of the Oman Vision 2040, is likely to push these measures forward. “Key priorities include improving labor market flexibility, promoting women’s employment, improving the business environment, advancing SOE reforms, leveraging digitalization and further implementing green initiatives.”
However, heightened global uncertainties continue to cloud the outlook, with near-term downside risks dominating, the IMF said.
On the other hand, the outlook could be strengthened by higher-than-expected windfalls from hydrocarbons, accelerated implementation of structural reforms under Vision 2040 and realization of investment projects by regional partners, the statement said.
The country has explored AED30 billion worth of investment opportunities and increased bilateral economic cooperation in strategic sectors with the UAE.
(Reporting by Brinda Darasha; Editing by Daniel Luiz)