Muscat – Oman’s economic recovery in 2022, a substantial reduction in the country’s debt-to-GDP ratio and its focus on investment spending are all promising and commendable, according to a report released by SICO, a Bahrain-based leading regional investment bank.

SICO shared insights into Oman’s current economic climate in a report analysing progress in achieving targets set forth in Oman’s tenth five-year plan (2021-2025) including debt management, fiscal reforms, and attracting foreign direct investment (FDI).

The report is based on insights gained from an exclusive discussion between Sumaya Aljazeeri, assistant vice president from SICO’s Investment Research, and H E Dr Said al Saqri, Oman’s Minister of Economy, in addition to insights from government representatives from the Ministry of Finance and Oman Vision 2040 team during the MSX Roadshow Conference.

‘For Oman, 2022 is a year of re-arranging the books, and can be best described as a year of transitioning towards stronger growth in the medium-term (2023-2025). The recovery witnessed in the Omani economy, lowering debt-to-GDP ratio, and focusing on investment spending are all promising and commendable,’ the report said.

However, it said that Oman continues to face challenges from upcoming debt maturities of nearly US$12bn-US$13bn by 2025, inflationary pressures resulting in higher subsidy bills, slower return of expats, and modest lending growth to the private sector.

The SICO report noted that Oman’s key focus has been debt management, which saw debt-to-GDP ratio drop from 60 per cent in 2021 to 55 per cent of GDP in the first half of 2022, well below its stated target, after cutting debt levels by RO2.2bn to RO18.6bn.

Earlier in 2022, Oman had reaffirmed its earlier commitment to curbing increase in net government debt over the next three years in its 2022 budget, projecting debt-to-GDP to reach 60 per cent levels by 2024.

‘In parallel, the introduction of the VAT has positively contributed to revenues, and the income tax – if implemented as scheduled in 2024 – is another step in fiscal revenue diversification,’ the report said.

It said Oman’s fiscal spending has seen a change in direction in 2022 after a slowdown in public spending in the last three years. Capitalising on higher oil and gas revenues, the government has increased capital expenditure allocation and is adopting proactive investment planning across sectors.

The government’s pipeline is focused on multiple key projects in the services’ sector, mainly logistics, transport, and the oil and gas sector, the report said.

‘Nonetheless, the rate at which the economy picks up and investment spending becomes reflected in projects on the ground will set the momentum of growth for Oman and show sincerity to foreign investors,’ the SICO report added.

It further said that investment spending will be a key driver in sustaining the upward trajectory of real GDP growth.

The report concluded that Oman is in a transitory phase progressing towards higher growth albeit slower than its GCC peers, as it makes strides in achieving set targets in the tenth five-year development plan.