IMF projects Oman’s non-oil economy to grow 1.5pc in 2021

14 February, 2021 12:00 AM printer

DUBAI: The International Monetary Fund forecast that Oman’s non-oil gross domestic product will grow 1.5 per cent in 2021 and could improve to 4 per cent by 2026 on successful implementation of fiscal measures.

The sultanate introduced a Medium-Term Fiscal Adjustment Plan that aims to boost non-oil revenue and various other public sector reforms to fuel economic growth, the lender said at the end of its virtual mission to the Gulf country from January 17 to 31, report agencies.

“Steady implementation of fiscal adjustment plans would strengthen fiscal and external balances substantially over the medium term,” the IMF said.

However, medium-term fiscal consolidation would weigh on growth, it added.

The twin shocks of the coronavirus pandemic and slump in oil prices have taken a toll on the Oman economy in 2020. Overall GDP contracted by 6.4 per cent, with non-hydrocarbon GDP estimated to have contracted by 10 per cent and a smaller decline in hydrocarbon GDP, the Washington-based lender said. The country’s current account deficit is estimated to have widened from 5.4 per cent of GDP in 2019 to 10 per cent in 2020, mostly owing to lower hydrocarbon exports, according to the IMF. International reserves declined to around $15 billion or worth 6.5 months of imports.

Overall, the fiscal deficit rose by 10.6 percentage points to 17.3 per cent of GDP and was financed by external bond issuance, drawdown of deposits and sovereign funds, and privatisation proceeds. As a result, central government debt rose to 81 per cent of GDP, from 60 per cent in 2019, the IMF added.

The sultanate has adopted various fiscal measures over the last year to support the economy, including interest-free emergency loans, waiving or reducing selected taxes and fees, flexibility to pay taxes in instalments, and establishing the Job Security Fund to support citizens who lost their jobs.

In addition, the Central Bank of Oman eased financial conditions through lower interest rates and liquidity injections, deferred loan instalment payments, and relaxed requirements on capital buffers and liquidity ratios. The fiscal adjustment plan, or Tawazun, targets the elimination of the fiscal deficit over 2021 to 2025 by boosting non-oil revenues, while keeping nominal fiscal expenditures broadly constant.

The government also established the Oman Investment Authority with a mandate to strengthen the governance and efficiency of public enterprises, while it also created a new holding company, Energy Development of Oman, to manage and finance government investments in oil, gas and renewables, the statement said.