Economic Overview
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The Sultanate of Oman has had extraordinary economic development since 2004, primarily due to the exploitation of its oil reserves. Despite Omani authorities' swift attempts to contain the spread of Covid-19 pandemic, social distancing measures took their toll on the economy, which contracted by 3.2% in 2020, according to the IMF. Nonetheless, this was much smaller than an earlier projection of 10%, as oil production fell at a slower rate than initially expected. Oman's GDP was again in positive territory in 2021 (+3%) and 2022 (+4.4%). It is now expected to reach 4.1% in 2023, mainly supported by the oil industry, and 1.9% in 2024.
Oman has a relatively healthy economic and financial situation. Nonetheless, the government debt expanded to an estimated 69.7% of GDP in 2020 from 60.5% in 2019 amid higher social and health expenditure, and then 62.9% of GDP in 2022, before decreasing to 45.4% in 2022. Public debt is expected to decrease again to 41.1% in 2023 and 38.1% in 2024. Lower global oil prices, paired with weaker fiscal revenues pulled the current account deficit to 17% of GDP in 2020, but Omani authorities aimed to halve the deficit in 2021 through fiscal consolidation measures : it came back to 6.1% in 2021 and 6.2% in 2022. A 5% value-added tax was introduced in April 2021, along with an expansion of the excise tax base. Inflation, which was 1.5% in 2021 increased to 3.1% in 2022 and is forecasted to come down to 1.9% in 2023 and 2.1% in 2024. Oman's financial soundness indicators were healthy, according to IMF estimates, with banks' liquidity coverage ratio standing around 200% early in 2022, considerably higher than legally mandated levels. In a bid to improve management of oil and gas revenues, the government established a new holding company called Energy Development of Oman (EDO). At the same time, in order to decrease its dependence on raw materials, Oman has established reforms to liberalise and diversify its economy in the framework of its “2040 Vision Plan” (continuation of 2020 Vision Plan), which aims to increase investment in the tourism, financial services and port activity sectors. Such reforms are slowly paying off, as confirmed by the fact that non-oil and gas economy now accounts for more than two-thirds of GDP.
According to World Bank, unemployment rate reached 3.1% in 2021, one of the highest level in nearly 30 years. At the same time, roughly half of Oman's youths are unemployed. Besides, nearly two million jobs are taken by migrant workers (National Centre for Statistics). The government introduced initiatives to tackle the high share of expatriate workers, including bans on foreign worker visas, to promote employment of Omani citizens.
Oil price volatility and insufficient fiscal adjustment could worsen the twin deficits and increase gross financing needs. Fiscal consolidation could also give rise to social tensions, thus undermining the reform drive. On the upside, a further rise in oil prices accompanied with a successful implementation of the reforms would improve the outlook (World Bank, 2022).
| Main Indicators | 2020 | 2021 | 2022 (E) | 2023 (E) | 2024 (E) |
| GDP (billions USD) | 73.97 | 88.19 | 114.67 | 104.90 | 109.69 |
| GDP (Constant Prices, Annual % Change) | -3.2 | 2.9 | 4.3 | 1.7 | 5.2 |
| GDP per Capita (USD) | 16,640 | 19,479 | 24,772 | 21,960 | 22,250 |
| General Government Gross Debt (in % of GDP) | 69.7 | 61.3 | 40.1 | 42.8 | 40.6 |
| Inflation Rate (%) | -0.9 | 1.5 | 2.8 | 1.9 | 2.4 |
| Current Account (billions USD) | -12.31 | -4.29 | 3.73 | 2.24 | 1.54 |
| Current Account (in % of GDP) | -16.6 | -4.9 | 3.3 | 2.1 | 1.4 |
Source: IMF – World Economic Outlook Database , October 2021
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