Oman's economy is showing an active recovery. Vaccination efforts have allowed all restrictions to be relaxed. If Oman's real GDP decreased by 3.2% in the pandemic 2020, then growth was already observed in 2021 (+3.0%). By the end of 2022, real GDP growth is projected at 4.4%, which is facilitated by the increase in hydrocarbon production and the continued recovery of economic activity in other sectors.
According to the IMF, inflation reached 1.5% in 2021. The recovery of economic activity and the growth of global inflationary pressure is expected to push the average inflation rate to 3.1% in 2022, given the relatively high dependence on imports and the large share of traded products in the consumer basket.
Thanks to measures taken by the Central Bank of Oman and strong buffer reserves, the banking system has relatively well endured the recent shocks caused by COVID-19 and now shows a high level of financial stability. However, the growth of lending to the private sector remains restrained. Much attention is paid to quality control of bank assets.
The authorities continue to implement a wide range of reforms under the Oman Vision 2040 program in order to stimulate the private sector. The main priorities include increasing the flexibility of the labor market, increasing employment among women, improving the business environment, using digital technologies and implementing "green" initiatives.
Nevertheless, Oman remains dependent on hydrocarbon exports, which provide 75% of tax revenues and a third of the country's GDP, despite investments in green initiatives and diversification of the sector. The discovery of new fields will contribute to the growth of production in the short term, however, given the rise in the cost of production methods, a long-term decline in oil production will begin during the current decade, which makes economic diversification the main goal of the sultanate's policy. Priority sectors for development are construction, food production, agriculture and fishing, chemical industry and plastics production, as well as logistics.
Oman's economic targets by 2040 under the Oman Vision 2040 program: achieving an annual real GDP growth rate of 5%, the budget deficit level of no more than 3% of GDP, doubling the growth rate of real GDP per capita, increasing the share of income from the non-oil sector of the economy to 18% of GDP, reducing the share of the oil sector to 8.4% of GDP, an increase in the share of foreign investment to 10% of GDP, a decrease in the share of government spending to 25% of GDP, the development of the industry of processing raw materials within the country, an increase in the share of the country's exports of products of the upper processing.
