MUSCAT: After a difficult 2020, Oman’s economy is on a solid path to recovery amid the easing of pandemic pressures, higher hydrocarbon outputs, and wide-ranging government reforms, the World Bank said in a report.

According to the World Bank, Oman’s economy is recovering gradually from the dual impact of the pandemic and the temporary collapse in oil prices it caused.

“Front loaded fiscal reforms, including VAT, and cuts in spending are expected to turn the country’s fiscal and current account deficits into surpluses, starting from 2022,” the World Bank said.

Estimates suggest that the country’s overall growth reached 2.1% in 2021. Hydrocarbon GDP grew by an estimated 2.2%, driven by higher oil production due to the easing of OPEC+ cuts and the coming on stream of a new liquified gas plant in mid-2021. Non-oil GDP is estimated to have rebounded by almost 2% in 2021, signaling the recovery of domestic and external demand, aided by increased vaccine penetration that boosted the sectors most impacted by the pandemic (tourism, hospitality, and retail). Annual inflation switched from negative territory in 2020 and picked up to an average of 1.5% in 2021, due to the introduction of VAT last April and to improved domestic demand.

“Oman’s economy is expected to improve gradually and to strengthen in the medium-term, supported by higher oil and gas production and ongoing structural reform. Growth is projected to pass 5% in 2022, underpinned by more than 8% growth in the hydrocarbon sector, boosted by the increased production of liquified natural gas in the key Ghazeer and Khazzan fields,” the report said.

“The country’s non-oil economy will continue to grow, exceeding 2% in 2022, as fast vaccine rollout strengthens domestic activity. Over the medium-term, growth will decelerate to an average of 2.7 % per year in 2023-2024, while the hydrocarbon sector will remain the main driver of growth,” the World Bank added.