The International Monetary Fund (IMF) expects Oman’s economic growth to remain moderate at 0.9 percent in 2024 due to oil output cuts during the first half of the year before accelerating to 4.1 percent in 2025 if hydrocarbon activity rebounds following the expected relaxation of OPEC+ quotas.
In a statement, the IMF also projected Oman’s non-hydrocarbon growth to increase to 2.6 percent in 2024 and 3.2 percent in 2025 from 2.1 percent in 2023. In addition, average headline inflation decelerated to 0 percent in the first quarter of 2024 from 0.9 percent in 2023, reflecting the ongoing easing of core, food, and transport inflation.
Oman’s fiscal position
“Favorable oil prices and sustained reform efforts continue to shore up fiscal and external positions,” stated IMF’s staff team leader Cesar Serra. Oman’s fiscal balance recorded a surplus of 6.6 percent of GDP in 2023 and the IMF expects it to remain in surplus over the medium term. Hence, comfortable hydrocarbon receipts, increasing non-hydrocarbon revenues, and fiscal discipline will continue to support Oman’s economic growth.
Despite public deleveraging, gross international reserves at the Central Bank of Oman stood at $17.5 billion in 2023, supported by a surge in foreign direct investment. In addition, the government’s debt-to-GDP ratio declined further to 36.5 percent in 2023 from 40.9 percent in 2022 as the government continues to use its fiscal surplus to prepay its debt.
Banking sector remains resilient
The IMF statement highlighted Oman’s resilient banking sector. “Bank capital and liquidity ratios and profitability continue at comfortable levels amid strong asset quality,” stated Serra. The statement also revealed that banks’ net foreign asset position turned positive in December 2023 for the first time since 2014 due to a rise in investments in foreign securities and an expansion in credit to the private sector. “The near- to medium-term outlook is favorable and risks to the outlook are broadly balanced,” added Serra.
On a positive note, the IMF believes that growth and fiscal and external positions would become stronger by a surge in oil prices. This will accelerate reforms under Oman Vision 2040 and investments from regional partners. However, geopolitical tensions in the region, an abrupt global slowdown, particularly in China, and higher-for-longer global interest rates still pose a risk to Oman’s economic growth.
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