Economic Outline

Economic Indicators

The Sultanate of Oman has experienced remarkable economic growth since 2004, primarily driven by the exploitation of its oil reserves. Despite a contraction due to the pandemic, Oman's economic recovery continued in 2022 (+4.3% of GDP), supported by favorable oil prices and sustained reform momentum. In 2023, growth persisted, albeit at a slower pace (+1.2%), reflecting OPEC+-related oil production cuts. GDP growth is projected to slightly expand to 1.4% in 2024, supported by increased gas production, the commencement of operations at the Duqm refinery, and higher non-hydrocarbon growth (2.5%). Over the medium term, non-hydrocarbon growth is expected to gradually increase to 4%, supported by global demand recovery, continued reforms, and robust private investment, particularly in non-hydrocarbon sectors (IMF).

Oman has made significant progress in strengthening its fiscal and external positions while advancing the implementation of Oman Vision 2040. The Medium-Term Fiscal Plan (MTFP), initiated in 2020, has played a crucial role in achieving fiscal sustainability by diversifying revenue streams, controlling expenditures, and prudently managing hydrocarbon windfall savings. The overall fiscal balance achieved a surplus of 5.5% of GDP in 2023, driven by favorable oil prices and sustained fiscal discipline. However, it is projected to decrease to 3.7% of GDP in 2024, mainly due to increased social spending as the new social protection law takes effect. Over the medium term, the overall fiscal balance is expected to remain comfortably in surplus, declining to 3.3% of GDP by 2028 in line with oil price trends. Central government debt, which stood at 37.7% of GDP in 2023, is forecasted to decrease to around 30% of GDP by 2028, supported by favorable debt dynamics and ongoing net repayments. Oman's risk of sovereign debt stress is assessed as low, supported by the availability of liquid financial assets to the government, which helps mitigate solvency and liquidity risks. Inflation decreased to 1.2% in 2023, primarily attributed to lower transport and food inflation rates, and is anticipated to align with a target of 2% over the medium term, consistent with the currency peg to the U.S. dollar.

According to the IMF, employment grew by 16.2% in 2022, primarily driven by the recovery of expatriate employment to pre-pandemic levels. Omani employment grew at a modest 3.6% in 2022. However, recent data indicates a continued increase in expatriate employment but a decrease in Omani employment in the first half of 2023. In response, the government introduced initiatives to address the high share of expatriate workers, including bans on foreign worker visas, to promote the employment of Omani citizens. Additionally, the authorities have implemented a new labor law focused on modernizing regulations and enhancing working conditions and flexibility in the labor market. Several initiatives have been launched to bolster the employment of nationals in the private sector, including the Wage Protection System and providing wage support to private sector employers for hiring nationals.

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