A staff team from the International Monetary Fund (IMF), led by Mr Daniel Kanda, visited Muscat, Oman, during June 5-12, 2022 to discuss economic developments, the outlook, and the country’s policy priorities.

At the conclusion of the mission, Mr. Kanda issued the following statement:

“The authorities undertook substantial vaccination efforts and policy actions to mitigate the fallout from the COVID-19 pandemic and foster the recovery. Nearly all persons 12 years and older had been at least partially vaccinated and about 90 percent were fully vaccinated as of end-May 2022. With declining infections, all COVID-19 related restrictions have been removed. Targeted fiscal, monetary, and financial measures provided relief to households, firms, and banks.

“The economy is strengthening, and inflation has been contained so far. Real GDP grew by 3 percent in 2021, largely driven by the buoyant hydrocarbon sector. The economy is projected to grow by about 4.5 percent in 2022, benefiting from increased hydrocarbon production and continued recovery of non-hydrocarbon activities. Inflation turned positive to 1.5 percent in 2021 and is projected to increase to 3.7 percent in 2022, given rebounding economic activity and rising global inflationary pressures. There are limited direct trade or financial links to Russia and Ukraine.

“Higher oil prices and fiscal consolidation have improved fiscal and external positions. The fiscal balance is expected to improve to a surplus of 5.5 percent of GDP in 2022, with surpluses persisting over the medium term owing to higher oil prices and continued consolidation under the authorities’ Medium-Term Fiscal Plan (MTFP). Alongside, central government debt is expected to decline substantially from about 63 percent of GDP in 2021 to 45 percent of GDP in 2022. Buoyed by oil exports, the current account balance is projected to improve to a surplus of 6.8 percent of GDP in 2022. International reserves held at the CBO increased to US$19.7 billion (5.2 months of prospective imports) in 2021.

“The banking system has weathered the recent shocks relatively well, supported by substantial capital and liquidity buffers and the Central Bank of Oman’s continued efforts in strengthening regulatory and supervisory frameworks.

“However, uncertainties and downside risks continue to cloud the outlook. Downside risks stem particularly from uncertainty about the war in Ukraine and its impact on the global economy, a renewed flare-up of COVID-19 infections, tighter-than-expected global financial conditions, increased inflationary pressures from higher global food and energy prices, more persistent disruption in global supply chains, and pressures to spend the hydrocarbon windfall. Upside risks to the outlook could come from higher-than-expected hydrocarbon windfall and accelerated implementation of structural reforms under Vision 2040. In this context the IMF team welcomes the authorities’ continued strong commitment to fiscal consolidation, under the MTFP, and structural reforms to reinforce fiscal and external sustainability.

“The IMF staff team would like to thank the Omani authorities and other counterparts for the open and candid discussions and their warm hospitality.”