Oman flag Oman: Economic and Political Overview

The economic context of Oman

Economic Indicators

The Sultanate of Oman has experienced remarkable economic growth since 2004, primarily driven by the exploitation of its oil reserves. Despite a contraction due to the pandemic, Oman's economic recovery continued in 2022 (+4.3% of GDP), supported by favorable oil prices and sustained reform momentum. In 2023, growth persisted, albeit at a slower pace (+1.2%), reflecting OPEC+-related oil production cuts. GDP growth is projected to slightly expand to 1.4% in 2024, supported by increased gas production, the commencement of operations at the Duqm refinery, and higher non-hydrocarbon growth (2.5%). Over the medium term, non-hydrocarbon growth is expected to gradually increase to 4%, supported by global demand recovery, continued reforms, and robust private investment, particularly in non-hydrocarbon sectors (IMF).

Oman has made significant progress in strengthening its fiscal and external positions while advancing the implementation of Oman Vision 2040. The Medium-Term Fiscal Plan (MTFP), initiated in 2020, has played a crucial role in achieving fiscal sustainability by diversifying revenue streams, controlling expenditures, and prudently managing hydrocarbon windfall savings. The overall fiscal balance achieved a surplus of 5.5% of GDP in 2023, driven by favorable oil prices and sustained fiscal discipline. However, it is projected to decrease to 3.7% of GDP in 2024, mainly due to increased social spending as the new social protection law takes effect. Over the medium term, the overall fiscal balance is expected to remain comfortably in surplus, declining to 3.3% of GDP by 2028 in line with oil price trends. Central government debt, which stood at 37.7% of GDP in 2023, is forecasted to decrease to around 30% of GDP by 2028, supported by favorable debt dynamics and ongoing net repayments. Oman's risk of sovereign debt stress is assessed as low, supported by the availability of liquid financial assets to the government, which helps mitigate solvency and liquidity risks. Inflation decreased to 1.2% in 2023, primarily attributed to lower transport and food inflation rates, and is anticipated to align with a target of 2% over the medium term, consistent with the currency peg to the U.S. dollar.

According to the IMF, employment grew by 16.2% in 2022, primarily driven by the recovery of expatriate employment to pre-pandemic levels. Omani employment grew at a modest 3.6% in 2022. However, recent data indicates a continued increase in expatriate employment but a decrease in Omani employment in the first half of 2023. In response, the government introduced initiatives to address the high share of expatriate workers, including bans on foreign worker visas, to promote the employment of Omani citizens. Additionally, the authorities have implemented a new labor law focused on modernizing regulations and enhancing working conditions and flexibility in the labor market. Several initiatives have been launched to bolster the employment of nationals in the private sector, including the Wage Protection System and providing wage support to private sector employers for hiring nationals.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 114.67109.13108.93111.05114.81
GDP (Constant Prices, Annual % Change) 4.31.31.23.13.5
GDP per Capita (USD) 23,44721,62320,91320,66020,697
General Government Gross Debt (in % of GDP) 39.836.435.433.531.6
Inflation Rate (%) 2.50.91.31.52.0
Current Account (billions USD) 5.651.952.962.342.24
Current Account (in % of GDP) 4.91.82.72.12.0

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

Oman has a workforce of 2.26 million out of its 4.69 million population, of whom about 43% are expatriates. The share of expatriate workers has declined in recent years as Oman implemented a visa ban to boost hiring of Omani citizens. Prior to the discovery of oil fields, Oman was virtually a subsistence economy that was entirely based on agriculture and fisheries. Nowadays, the latter contributes only marginally to GDP (1.8%) and employs 6% of the workforce (World Bank, latest data available). Agricultural production is mainly composed of dates, limes, bananas, and owing to the lack of fertile land the country needs to import from international markets. In the agricultural season of 2022/2023, wheat production in the Sultanate of Oman saw a remarkable surge of 229%, totaling 7,119 tonnes. Additionally, the number of farmers increased by 24%, and the area dedicated to wheat cultivation expanded by 160% year-on-year, according to data from the Ministry of Agriculture.

The industrial sector accounts for 57% of GDP and employs 47% of the workforce (World Bank). Its share has increased considerably in the last two decades (employment in industries was as low as 11% in 2000) as Oman increasingly uses enhanced oil recovery techniques and supports mining and manufacturing. The manufacturing sector alone is estimated to contribute to 10% of GDP (World Bank). However, the country is heavily dependent on oil and gas resources, which generate between 70% and 85% of government revenue on average, depending on fluctuations in commodity prices.

The services sector accounts for 44.5% of GDP and 47% of the workforce (down from 82.4% in 2000). Oil-related activities comprise a significant share of the services sector; however, logistics (maritime transport in particular) and financial activities are growing steadily. Tourism is one of the sectors being developed in order for the Sultanate to build a sustainable non-oil future, and the number of tourists has more than doubled in the last decade (3.5 million in 2019, according to the National Centre for Statistics and Information) and just over 3 million in 2023. Banking activity in the region is predominantly controlled by six domestic banks and two Islamic banks. Additionally, there are nine foreign banks, although they typically operate only one branch each. The sector exhibits moderate concentration, with the largest bank, currently the sole domestically systemically important bank (DSIB), holding approximately 40% of total banking assets, as reported by the IMF.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 4.1 48.3 47.6
Value Added (in % of GDP) 1.8 57.0 44.5
Value Added (Annual % Change) -9.7 5.1 4.2

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
64,6/100
World Rank:
71
Regional Rank:
7

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 
 

Country Risk

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Sources of General Economic Information

Ministries
Ministry of Energy and Minerals
Statistical Office
National Centre for Statistics and Information
Central Bank
Central Bank of Oman
Stock Exchange
Muscat Stock Exchange
Economic Portals
Zawya News
Oman Economic Review
Muscat Daily Business News
 

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Latest Update: May 2024

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