The Sultanate of Oman’s economic outlook has continued to brighten on the back of buoyant international energy prices and slumping public debt, garnering praise from a cross-section of global rating agencies and multilateral institutions.
The International Monetary Fund (IMF), most notably, wrapped up its most recent Article IV Consultation with Omani authorities with a robust acknowledgement of the efforts made by the Sultanate of Oman in facing the various challenges unleashed by the global economic downturn and accompanying pandemic.
In its concluding statement, the IMF indicated that “overall real GDP growth rebounded from -3.2 per cent in 2020 to 3.0 per cent in 2021, and is projected at 4.3 per cent in 2022, supported by increased hydrocarbon production and continued recovery of non-hydrocarbon economic activities. Moreover, rebounding economic activity and elevated global inflationary pressures are expected to push up average inflation to 3 per cent in 2022 due to increased inflationary pressures from higher global food and energy prices, more persistent disruption in global supply chains, pressures to spend the hydrocarbon windfalls, and climate-related events”.
Furthermore, the mission stressed that high oil prices and fiscal consolidation under the Sultanate of Oman’s Medium-Term Fiscal Plan (MTFP) have considerably improved fiscal and external balances. The overall public finance balance improved by 12.8 percentage points of GDP to a deficit of 3.2 per cent in 2021. Fiscal and external surpluses are expected in 2022, public debt declined to 62.9 per cent of GDP in 2021, and it is expected to decline to about 44 per cent of GDP in 2022.
The IMF also agreed that the banking system had weathered the recent shocks relatively well. Financial soundness indicators appear healthy, benefiting from the strong buffers before entering the crisis.
It noted that Oman continues to press forward with a broad array of structural reforms under Oman Vision 2040, with the goal of achieving the strong, job-rich, and sustainable private sector-led growth needed to offer opportunities to job-seekers and ensure higher living standards for future generations.
Key priorities include enhancing labour market flexibility, boosting female employment, improving the business environment, advancing SOE reforms and governance, leveraging digitalisation, and continuing the implementation of green initiatives.
Echoing this positive outlook, the World Bank noted in its latest Gulf Economic Update that Oman’s post-pandemic economic recovery is anticipated to strengthen over the medium term, buoyed by strong oil and gas prices, growth in hydrocarbon output, and comprehensive fiscal reforms.
“(Oman’s) GDP growth is forecast to reach 4.5 per cent in 2022 before moderating to an average of 3.2 per cent in 2023-24,” the World Bank report said. “The overall fiscal deficit is expected to turn into a surplus of nearly 6 per cent of GDP in 2022 - the first surplus in almost a decade — reducing gross financing needs.
Similarly, the external balance is swinging back into surplus (6 per cent of GDP in 2022) - the first surplus in 7 years — on the back of higher oil receipts and recovery in non-oil exports.”
More recently, the Ministry of Finance revealed that Oman’s budget recorded a surplus of RO 1.123 billion as of September-end 2022 versus a deficit of RO 1.030 million over the same period in 2021.
Oman’s public revenue stood at RO 10.567 billion at the end of September 2022, up by 43.4 per cent compared to RO 7.368 billion registered over the same period in 2021.
This is mainly due to an increase in oil prices and production.
By the end of September 2022, hydrocarbon revenue increased to RO 8.102 billion, up by 51.9 per cent compared to RO 5.331 billion registered over the same period in 2021. The increase is supported by a higher average oil price of $94 per barrel, as well as an increase in crude oil production to 1,056,000 barrels per day.
Current revenue increased by 22.3 per cent to stand at RO 2.450 billion by the end of September 2022, compared to RO 2.004 billion over the same period in 2021.
Public spending increased by 12.5 per cent to RO 9.444 billion by the end of September 2022, up by RO 1.046 billion when compared to the same period in 2021.
The development expenditure of ministries and civil units amounted to RO 657 million, representing 60 per cent of total development spending, i.e. RO 1.100 billion, allocated for 2022.
Meanwhile, current expenditure by the end of September 2022 increased by 10.1 per cent to stand at RO 7.070 billion when compared to the figures registered over the same period in 2021.
Total contributions and other expenses increased to RO 1.434 billion compared to RO 578 million registered over the same period in 2021.