Oman’s economic activity is gradually recovering
Non-hydrocarbon growth is projected to increase gradually over the medium term
Private sector credit growth has moderated and interest rates have increased
IMF Executive Board called for an expeditious introduction of VAT
Directors commended the ongoing implementation of the Tanfeedh Program
Economic activity gradually recovering
According to the IMF report, the real non-hydrocarbon GDP growth of Oman has increased to about 1.5% last year, a reflection of higher confidence driven by the rebound in oil prices. Non-hydrocarbon growth is projected to increase over the medium term.
Increase in oil and gas production boosted hydrocarbon GDP growth in 2018 to 3.1%.
Overall, real GDP growth was 2.2%
Executive Board Assessment: Highlights
Oman’s efforts to enhance private sector growth, reduction in spending, and diversification efforts were commended by the Directors.
They also noted that economic activity had started to recover last year and that the fiscal and current account deficits improved. Notwithstanding these efforts and the recovery in oil prices, Directors indicated that Oman’s public and external vulnerabilities have continued to grow.
IMF Directors called for a deeper fiscal adjustment to maintain confidence and ensure fiscal and external sustainability, coupled with continued structural reforms to diversify the economy, improve productivity and enhance private‑sector‑led growth.
Introduction of VAT
While welcoming the authorities’ plans to continue with fiscal consolidation, they called for an expeditious introduction of VAT and measures to adjust government expenditure.
They also encouraged the authorities to lay out and implement an ambitious medium‑term fiscal adjustment plan, based on reforms to tackle current spending rigidities, streamline public investment, and raise non‑hydrocarbon revenue, while prioritizing measures that limit the impact on growth and place more of the adjustment on those who can best shoulder it.
Directors also commended the ongoing implementation of the Tanfeedh Program with a focus on economic diversification and job creation. They encouraged further reforms to address labor market rigidities including by better aligning public‑sector compensation with that of the private sector and by addressing skills mismatches through higher quality education and training.
They also encouraged further SME development including through better access to finance, to raise productivity.