Growth of Omani economy over past five years

Growth of Omani economy over past five years

8 January 2025

Under the leadership of  His Majesty Sultan Haitham bin Tarik Al Said , Oman’s economy has achieved positive growth thanks to economic diversification efforts, enhanced non-oil revenues, and the expansion of the economic production base. These measures have supported GDP growth, attracted investments, and stimulated the private sector.

To achieve financial balance between revenues and expenditures in the medium term and reduce fiscal deficits, the Government launched a medium-term fiscal plan (2020-2024). This aims to ensure fiscal sustainability by implementing initiatives and financial policies focused on stimulating economic growth, diversifying government revenues, rationalising expenditures, and enhancing social protection systems.

Growth of Omani economy over past five years

The Government’s efforts under the medium-term plan have successfully laid strong foundations for achieving fiscal sustainability and ensuring long-term financial stability.

Building on these efforts, the National Programme for Fiscal Sustainability and Financial Sector Development (2023-2025) is working to create a dynamic, robust, and innovative financial sector that offers diverse financing solutions, enabling economic growth and achieving balanced and sustainable development led by the private sector.

The Omani private sector plays a pivotal role in economic development and GDP growth across various sectors, particularly those key to economic diversification.

The sector has been actively enhancing its contribution to national economic growth by leveraging opportunities offered through initiatives such as the National Programme for Investment and Exports Development (Nazdaher) which targets private sector development and foreign trade. It also seeks to promote fiscal sustainability and stimulate initiatives, while strengthening partnerships with the government sector.

Oman has implemented numerous strategic projects across its governorates, including: the Duqm Refinery and Petrochemical Industries project in the Duqm Special Economic Zone; the “Salal” Central Fruit and Vegetable Market in Khazaen Economic City, Wilayat Barka; the Fish Canning and Value Addition Complex in Duqm; and many renewable energy projects.

Growth of Omani economy over past five years

The level of public debt in Oman, has seen positive developments thanks to the continued implementation of various government.

Efforts have been focused on rationalising and improving expenditure efficiency, increasing non-oil government revenues, and benefiting from higher oil prices. As a result, public debt decreased to approximately OMR 14.4 billion, or 34% of GDP, by the end of 2024, compared to OMR 19.8 billion, or 67.9% of GDP, at the end of 2020.

There have also been  notable improvements in Oman’s credit ratings by major international agencies during 2021-2024. This has been achieved thanks to improvements in oil prices, along with the implementation of measures under the medium-term fiscal plan, the reduction of public debt risks, and improvements in financial and economic performance,

  • Standard & Poor’s: Upgraded from B+ in 2020 to BBB- with a stable outlook in 2024, regaining investment-grade status.
  • Fitch: Upgraded from BB- in 2020 to BB+ with a positive outlook in 2024.
  • Moody’s: Upgraded from Ba3 in 2020 to Ba1 with a positive outlook in 2024.

Growth of Omani economy over past five years

Dr Said bin Mohammed bin Ahmed Al Saqri, Minister of Economy, says that the measures implemented in 2020 marked a pivotal starting point for achieving Oman Vision 2040   and laid down solid foundations that have and will continue to make it possible for Oman to achieve significant accomplishments.

He notes that the restructuring of the state’s administrative apparatus and the consolidation of government investments under the Oman Investment Authority enhanced the efficiency of managing national resources. This contributed to the country’s ability to address the challenges of the COVID-19 pandemic.

The Minister adds that the Government initiated a medium-term fiscal plan aimed at achieving financial stability and introduced support packages for the private sector, entrepreneurs, and those affected by the pandemic, including addressing the impact of declining oil prices. These efforts facilitated the transition of Oman’s economy from a downturn in 2020 to a recovery trajectory starting in 2021, with sustainable growth achieved during the initial years of the Tenth Five-Year Plan.

Oman’s economy continues to grow and expand, he says, driven by new strategic projects, ongoing development of economic legislation, and the launch of targeted programmes and initiatives that enhance investment appeal and accelerate economic diversification. These efforts fall within the framework of the Tenth Five-Year Plan (2021-2025), the first phase of Oman Vision 2040, which aim to strengthen the Sultanate’s position on the global economic map.

The Minister notes that Oman’s GDP grew by 1.9% at constant prices from January to September 2024 compared to the same period in 2023. This growth was driven by a 4.2% increase in non-oil activities, despite a 2.8% decline in oil activities.

He explains that in 2024, the Omani government continued implementing new programmes and initiatives to support economic diversification and attract further investment. These initiatives focus on localising technologies, empowering the private sector, enhancing the role of small and medium enterprises and encouraging startups.

The Minister says that these initiatives have helped achieve the objectives of the Tenth Five-Year Plan, for example, raising the share of foreign direct investment (FDI) to 10.6% of GDP and increasing private sector investment contributions to 60% of GDP.

He notes that FDI has grown significantly during the past years of the Tenth Plan, with cumulative FDI reaching approximately OMR 26 billion by the end of Q2 2024. New inflows amounted to around OMR 3.9 billion, compared to the same period in 2023.

The Minister also notes that in 2024, Future Fund Oman began operating as an innovative financing institution aimed at attracting new, high-quality investments in promising sectors. The fund has already achieved positive results, launching its first wave of investment projects in partnership with local companies and international investors. These projects have a total value of more than OMR 832 million, including OMR 609 million in foreign investments.

Thanks to the fund and progress in implementing economic diversification initiatives Oman has been listed for the first time among the top 25 emerging markets attractive for investment, according to the “Foreign Direct Investment Confidence Index 2024” issued by Kearney. This reflects anticipated positive foreign investment trends in the coming years.

Growth of Omani economy over past five years

The Minister notes that 2024 witnessed significant advancements in Oman’s competitiveness as ranked by key global indicators. Among the highlights:

The Minister says that these improvements reflect significant efforts to achieve the objectives of Oman Vision 2040 and position the Sultanate among leading nations globally.

He says national teams under the National Competitiveness Office at the Ministry of Economy have played a key role in  strengthening collaboration between relevant entities, offering consultations, and implementing initiatives to improve Oman’s standing in global indices.

Economic and Financial Indicators
Statistics indicate remarkable growth in Oman’s economic and financial indicators over the past five years.

Nominal GDP reached OMR 40.7 bn in 2023, exceeding the average target of OMR 29.5 bn under the Tenth Five-Year Plan (2021-2025) by 38%.
The average growth rate achieved during 2021-2023 was 12.4%, surpassing the plan’s target of 5.5%. This growth is attributed to:

  • An average increase of 27.8% in oil-related activities.
  • An average increase of 6.2% in non-oil activities during 2021-2023.
  • Both oil and non-oil activities outperforming the plan’s targeted growth rates of 5.5% and 5.7%, respectively.

Growth of Omani economy over past five years

This growth is attributed to the rise in the average price of Omani crude oil, which reached approximately $80.7 per barrel during the period 2021-2023. This represents an increase of 75% compared to 2020 prices and 68% above the assumed average oil price of $48 per barrel in the Tenth Five-Year Plan. This growth also reflects the recovery of economic activities from the impacts of the pandemic, supported by Oman’s policies to mitigate its negative effects.

As a result of the developments in nominal GDP and population growth, the average per capita GDP at current prices increased by an average of 7.1%, reaching approximately OMR 8,000 during 2021-2023, compared to OMR 6,500 in 2020. This exceeded the plan’s target average of OMR 6,000.

In the first nine months of 2024, nominal GDP grew by 2.7% compared to the same period in 2023. This growth resulted from a 4.2% increase in non-oil activities and a slight 0.3% increase in oil activities, attributed to a 3.5% rise in the average price of Omani crude oil, which reached $82.6 per barrel between January and September 2024, compared to $79.9 per barrel during the same period in 2023.

The government’s economic forecasting team expects nominal GDP to grow by 3% in 2024 and 3.4% in 2025, while the National Centre for Statistics and Information projects nominal GDP growth of 2.5% in 2024.

Real GDP, has also grown, reaching approximately OMR 37.7 bn in 2023. This exceeds the target average of OMR 30.98 bn during the plan period (2021-2025), with an average growth rate of 3.9% during 2021-2023, surpassing the plan’s target of 3.5%.

Growth of Omani economy over past five years

This growth resulted from a significant increases in non-oil activities, which grew at an average rate of 4.2%, and an increase in oil activities, which recorded an average growth of 3.9% during 2021-2023. Both rates exceeded the target growth rates of 3.2% for non-oil activities and 3.5% for oil activities set under the Tenth Five-Year Plan (2021-2025).

Based on developments in real GDP and population figures, the average per capita real GDP experienced a slight decline of 0.9%, reaching approximately OMR 7,500 during 2021-2023, maintaining the same level as in 2020.

By the end of September 2024, real GDP grew by 1.9% compared to the same period in 2023, driven by a 4.2% growth in non-oil activities, despite a 2.8% decline in oil activities. This growth occurred despite a 5.1% decline in average daily oil production during the first nine months of 2024.

The government’s economic forecasting team anticipates real GDP to grow by 1.9% in 2024 and 2.7% in 2025, while the International Monetary Fund projects growth of 1% and 3.1%, respectively, for the same years.

Total investment increased from approximately OMR 7.97 bn in 2020 to OMR 10.9 bn in 2023, representing an average growth rate of 11.7% during 2021-2023. Although the growth rate matched the GDP growth rate, the investment-to-GDP ratio averaged 27.3% during this period, consistent with 2020 levels, and exceeded the plan's target of 26.5% for the Tenth Five-Year Plan.

Growth of Omani economy over past five years

The average contribution of the private sector to total investments stood at 49.3% during 2021-2022, which remains below the target of 60% set for the Tenth Five-Year Plan (2021-2025). This highlights the need for further efforts to enhance the role of the private sector in economic activities.

The average inflation rate, measured by the Consumer Price Index (CPI), was approximately 1.7% during 2021-2023, compared to a negative inflation rate of -0.4% in 2020. This reflects stable inflationary pressures at comfortable, safe, and acceptable levels.

The achieved inflation rate was below the plan’s target of 2.8%, due to the efforts of  central banks worldwide continued to contain inflation, which helped reduce the impact of imported inflation. Government measures, such as capping fuel prices based on October 2021 levels and subsidising basic food commodities, helped dampen inflation. The inflation rate decreased further to 0.6% from January to November 2024, compared to 1% during the same period in 2023.

Monetary and Banking Indicators
Monetary and banking indicators have  shown improvement during the Tenth Five-Year Plan period:

  • Domestic liquidity grew at an average annual rate of 7.7%, reaching OMR 24.8 billion by October 2024, compared to OMR 19.3 billion at the end of 2020.
  • Total deposits in the banking sector grew by 8.1% annually on average, reaching OMR 31.9 billion by October 2024, up from OMR 24.2 billion in 2020.
  • Total credit extended by banks increased at an average annual rate of 4.6%, reaching OMR 31.9 billion by October 2024, compared to OMR 26.7 billion at the end of 2020.

Stock Market and Balance of Payments

The Muscat Stock Exchange Index rose at an average annual rate of 5.4%, reaching 4,563 points in October 2024, compared to 3,659 points in 2020.

The current account balance within the balance of payments saw significant improvement, recording surpluses of OMR 2.2 bn (5% of GDP) in 2022 and OMR 1.01 bn (4% of GDP) in 2023. This contrasts with deficits of OMR 4.8 bn (16.5% of GDP) in 2020-2021.

These improvements were driven primarily by higher oil prices in 2022-2023 and increased demand for non-oil exports from key trading partners. The achieved current account surplus surpassed the target of a 5.5% GDP deficit set for the end of the plan.

Trade Balance

The trade balance also improved significantly during 2021-2023 with the trade surplus rising by an average of 104.4%, reaching OMR 7.8 bn (18.6% of GDP) in 2023, compared to OMR 1.5 bn (5.1% of GDP) in 2020.

This improvement resulted from a 26% average growth in exports and a 12% average growth in imports. The primary driver was the rise in crude oil prices and the recovery of economic activities. While non-oil exports increased their share of total exports to 32.8% in 2023, compared to 28.1% in 2020, oil exports continued to dominate, accounting for 61% of total exports in 2023.

Growth of Omani economy over past five years

The trade balance surplus increased by 3.4% during the period from January to October 2024, reaching approximately OMR 6.6 billion. This was driven by 8.7% growth in merchandise exports and 11.4% growth in merchandise imports, indicating an improvement in trade balance performance compared to the same period in 2023, primarily due to higher oil prices.

The cumulative value of foreign direct investment FDI at the end of 2023 reached OMR 25.4 bn, compared to OMR 14.3 bn at the end of 2020. This represents an average growth rate of 21.3%during the period 2021-2023.

FDI inflows in 2023 amounted to approximately OMR 4.8 bn, compared to OMR 900 million in 2020, reflecting an average growth rate of 121% during 2021-2023.

This growth is attributed to ongoing efforts to improve the business and investment environment, alongside incentives designed to attract and localise investments through various programmes,. These include the Private Investment Attraction Programme and the Investor Residency Programme. FDI inflows during 2021-2023 averaged 9.5% of GDP at current prices, nearing the target of 10.9% by the end of the plan.

In 2024, the cumulative value of FDI reached approximately OMR 26.7 bn, with inflows amounting to around OMR 3.9 bn, compared to the same period in 2023.