Oman’s economic recovery is gaining traction and is projected to grow at 4.3% in 2022, IMF said at the conclusion of staff mission recently.

"Strong vaccination efforts have allowed for the relaxation of all social distancing restrictions. Overall GDP growth rebounded from -3.2% in 2020 to 3.0% in 2021, and is projected at 4.3% in 2022, supported by increased hydrocarbon production and continued recovery of non-hydrocarbon economic activity," said the multilateral agency said in a statement on Wednesday.

High oil prices and fiscal consolidation under the authorities’ Medium-Term Fiscal Plan (MTFP), have improved fiscal and external balances considerably. The overall central government balance improved by 12.8 basis points of GDP to a deficit of 3.2% in 2021, largely due to higher oil revenue, expenditure restraint, and the introduction of VAT, it said.

Government finances improved and fiscal and external surpluses are expected in 2022. Central government debt declined to 62.9% of GDP in 2021 and it is expected to decline to about 44% of GDP in 2022, the fund said. 

Inflation in Oman has been contained thus far due to administered prices and caps on selected fuel prices. However, the recovery in economic activity and higher global inflationary pressures are expected to push up Oman's average inflation to 3% in 2022 "given the relatively high dependence on imports and large weight of tradable items in the CPI basket."

The GCC member, which has initiated a number of structural reforms under Oman Vision 2040, is likely to press forward on those measures. "Key priorities include enhancing labor market flexibility, boosting female employment, improving the business environment, advancing SOE reforms, leveraging digitalization, and continuing the implementation of green initiatives.” 

However, heightened global uncertainties continue to cloud the outlook, with downside risks dominating in the short run, the IMF said.

On the upside, the outlook could be bolstered by higher-than-expected hydrocarbon windfalls, accelerated implementation of structural reforms under Vision 2040, and the realization of investment projects from regional partners, the statement said.

The country has been exploring investment opportunities worth AED30 billion and higher bilateral economic cooperation in strategic sectors with the UAE.

(Reporting by Brinda Darasha; editing by Daniel Luiz)