Oman’s Economy Shows Remarkable Improvement
Following its recent assessment, Standard & Poor’s (S&P) has upgraded the outlook for the Sultanate of Oman from stable to positive while affirming its BB+ credit rating. This significant shift underscores a growing confidence in Oman’s economic stability and is seen as a precursor to potential upgrades in its credit rating. The move signals a favorable outlook on the nation’s financial health and the efficacy of its fiscal policies. Oman’s economy is on track, with the Ministry of Finance projecting at least 3% growth this year, coupled with the goal of maintaining inflation at moderate levels.
In laying out the 2024 budget, the Ministry of Finance has outlined ambitious targets to achieve economic and social objectives. The goals include sustaining an economic growth rate of at least 3% at constant prices during 2024 and keeping inflation rates around 3%. These projections highlight a strategic approach to economic management aimed at ensuring steady growth and financial stability.
Several factors contribute to the positive outlook revised by S&P, notably the government’s consistent efforts to diversify the economy away from oil dependence, striving for fiscal sustainability, and implementing economic reforms. Oman’s recent history showcases resilience and a strong rebound in economic and fiscal performance amidst global and geopolitical uncertainties. A combination of economic diversification initiatives, favorable oil market conditions, and sound fiscal policies has underpinned the economy’s progress over the past three years.
The Sultanate has shown commendable dedication to strengthening its fiscal stance through various measures, including subsidy reforms, revenue enhancement initiatives, and rationalising expenditure. These efforts are crucial for securing investor confidence and sustaining positive credit ratings. In 2022, Oman’s GDP growth stood at 4.3%, with a significant 2.1% growth recorded in the first half of 2023, largely driven by the non-oil sectors such as transportation, storage, agriculture, and fisheries. This underscores the success of Oman’s 10th Five-Year Plan in diversifying its economy.
Non-oil sectors have been instrumental, accounting for approximately 69.4% of the GDP in the first half of 2023, signifying the impact of the government’s diversification strategy. Proactive steps taken by the government, including stabilizing fuel prices and expanding VAT exemptions, demonstrate a commitment to cushion the inflationary pressures on the populace.
Moreover, His Majesty Sultan Haitham bin Tarik has recognized the positive impact of these efforts in driving GDP growth, improving the country’s financial and economic indicators, and enabling a surplus that can be channeled towards economic and social priorities. Successful fiscal management, evidenced by windfall oil revenues and the strategic implementation of Oman’s Medium-Term Fiscal Plan, has relieved debt pressures and provided much-needed economic buffers.
Standard & Poor’s confidence in Oman’s BB+ rating reflects a belief in the Sultanate’s prudent debt management and fiscal responsibility. The Central Bank of Oman’s Financial Stability Report 2023 highlights a reduction in the debt-to-GDP ratio to about 40%, a considerable improvement from 66% in 2021. This decrease in debt levels, combined with a growing GDP, enhances Oman’s debt sustainability and positions it for a brighter economic future.
The recent developments and strategic initiatives underscore Oman’s robust economic trajectory and its commitment to achieving long-term financial stability and growth. With a forward-looking approach, the Sultanate aims to continuously bolster its economy, ensuring prosperity and resilience against external shocks.
