RIYADH: Oman achieved a 6.2 percent budget surplus and a 2.4 percent current account gain in 2024, driven by prudent fiscal policies, high oil prices, and nonhydrocarbon export growth.
In its 2024 Article IV consultation, the International Monetary Fund attributed these figures to effective economic management.
Despite higher social spending under a new protection law, the nonhydrocarbon primary deficit as a share of nonhydrocarbon gross domestic product remained stable, highlighting the government’s commitment to financial discipline.
Government debt as a percentage of GDP also declined further, reaching 35 percent in 2024, marking continued improvement in Oman’s economic fundamentals.
The findings align with the broader resilience observed in the Gulf Cooperation Council region, with an IMF report released in December showing GCC economies have successfully weathered recent shocks, supported by strong nonhydrocarbon growth and ongoing reforms.
The latest analysis from the financial agency show that Oman’s economic resilience has been recognized internationally, with its sovereign credit rating recently upgraded to investment grade.
Additionally, the banking sector remains sound, with profitability recovering to pre-pandemic levels, ample capital and liquidity buffers, and strong asset quality.
While overall economic growth was tempered by OPEC+ oil production cuts, the IMF noted that Oman’s economy grew by 1.2 percent in 2023 and accelerated to 1.9 percent year on year in the first half of 2024.
This expansion was primarily supported by a 3.8 percent increase in nonhydrocarbon sectors such as construction, manufacturing, and services during the same period, it added.
Nonhydrocarbon activity is expected to remain a key driver of medium-term growth, supported by significant private sector investments.
The nation predicts a modest 2.7 percent growth in GDP this year, while the IMF projections point to a higher 3.1 percent expansion.
The country’s inflation has continued to ease, declining to 0.6 percent during the first 10 months of 2024, down from 1.0 percent in 2023. This decrease reflects a contraction in transport prices and a moderation in food inflation.
The IMF noted that Oman’s economic outlook is balanced but faces external and domestic risks. On the downside, global geopolitical tensions and a potential economic slowdown, particularly in China, could impact trade, tourism, and foreign direct investment.
Lower-than-expected oil prices amid a potentially oversupplied energy market in 2025 also pose risks to the fiscal and external positions, it added.
Domestically, delays in reform implementation and uncertainty around the global energy transition could hinder Oman’s diversification efforts.
On the upside, Oman could benefit from higher oil prices, faster-than-expected global economic growth, and accelerated reforms and investments under Oman Vision 2040.
The reform agenda includes initiatives to drive nonhydrocarbon growth, improve fiscal sustainability, and attract foreign investments.
Oman’s reform efforts under Vision 2040 aim to reduce the economy’s reliance on hydrocarbons and foster private sector-led growth.
The government has been executing sizable private sector investments and advancing structural reforms to expand the role of nonhydrocarbon sectors in the economy.
Over the medium term, nonhydrocarbon activity is expected to drive growth, supported by policy measures and a steady inflow of private capital.
The IMF’s report from December claimed regional conflicts had limited spillover effects, meaning the GCC maintained a favorable outlook — with the easing of oil production cuts and expansion in natural gas expected to further bolster the hydrocarbon sector.
It was also noted that inflation across the region remains stable at low levels, and external buffers are sufficient despite narrower current account balances.
