Praising the sultanate’s response to the COVID-19 crisis, the International Monetary Fund (IMF) has said that Omani authorities acted ‘rapidly and decisively’ to address the health and economic effects of the pandemic.
‘Oman moved rapidly and decisively to contain the COVID-19 crisis. Containment measures and health support to the population have limited the cases and fatalities. The authorities’ cautious approach towards reopening has helped contain new cases since early 2021,’ the IMF said in its statement of the 2021 Article IV Mission to Oman.
Recognising the positive impact of the sultanate’s Economic Stimulus Plan, the IMF said fiscal, monetary and financial support measures introduced by the government have been deployed to ease the burden on households, firms and banks.
‘The authorities have acted decisively to address the health and economic effects of the pandemic. While gradual recovery is expected in 2021 and beyond, combating the pandemic and mitigating its effects remain the key near-term priorities until recovery is firmly established,’ it said.
The IMF estimates that Oman’s real GDP – which contracted by 2.8 per cent in 2020 – will grow by around 2.5 per cent in 2021, with about three per cent average growth over the medium-term. The sultanate’s economy, as per the IMF, is expected to benefit from projected modest increase in hydrocarbon production in the medium-term.
The fund projects non-hydrocarbon GDP growth of 1.5 per cent for 2021, as vaccine rollout gradually restores domestic economic activity along with the recovery of external demand. ‘Thereafter, it (non-hydrocarbon GDP) increases gradually over the medium-term as the impact of fiscal adjustment subsides, reaching four per cent in 2026.’
However, there are substantial uncertainties around the sultanate’s economic outlook. The emergence of COVID-19 variants could prolong the impact of the pandemic on the global outlook and financial conditions, and thus intensify the economic impact on Oman, the IMF warned.
‘Volatility in oil prices would have a significant impact on the outlook. Fiscal consolidation could weigh on economic growth and social pressures could create headwinds for reforms. Upside risks to the outlook would come from a strong rollout of vaccination and a stronger rebound in global activity than anticipated,’ the fund explained.
The IMF said that Oman’s near-term priority continues to be combating the pandemic until the recovery is entrenched. Efforts, it added, have focused on addressing the health crisis (including vaccine rollout), supporting the recovery, minimising economic scarring, and mitigating risks to financial stability.