Muscat: In the non-oil sector, the economic recovery was broad-based, as all major sectors showed positive growth during 2022, and non-oil industrial activities expanded by 23.5 percent, the report explained.
This was mainly due to the recovery of the nominal output from the manufacturing sector by 49.6 percent. The real GDP (base year 2018) of the Sultanate of Oman grew by 4.3 percent during the year 2022 compared to a growth of 3.1 percent in the year 2021.
The report provides a detailed analysis about the developments in the Sultanate of Oman under real sector, external sector, financial sector and the public finance during 2022 and an outlook for the near future. A well-coordinated policy response in overcoming the economic repercussions of health conditions and geopolitical tensions over the past few years have contributed to the ongoing recovery of the Omani economy.
The 2022 state’s general budget achieved remarkable positive fiscal performance in 2022, surpassing previous years, driven by higher oil prices, adoption of prudent policy measures and improved fiscal discipline. The government achieved fiscal sustainability by enhancing non-oil revenue, increasing spending efficiency, and controlling the budget deficit. This resulted in a fiscal surplus of 2.6 percent and a current account surplus of 5 percent of GDP in 2022.
The external sector remained resilient, supported by strong growth in exports and sustained inflows of foreign direct investment (FDI). The authorities in the Sultanate remained committed to implementing a debt reduction strategy to effectively manage the country’s public debt. Through successful efforts, the government was able to reduce the public debt, resulting in it reaching 40.2 percent of GDP in 2022.
The banking sector remained well-capitalized with capital adequacy ratio of 19.7 percent at the end of 2022. The liquidity ratios of banks have also exceeded the prescribed norms. Strong capital and liquidity buffers have enabled banks to continue lending to the economy at a rate that was supportive of economic growth. The credit growth reached 4.9 percent, demonstrating an improvement over the previous year’s growth rate of 4.4 percent. The banking sector remained sound and resilient, amid continued technology adoption, and innovation in products and business models. More importantly, close monitoring of developments within the FinTech ecosystem has been prioritized, and the necessary steps have been taken to further promote vibrant, inclusive, safe and efficient digital financial products and services.
The report also includes the audited financial statements of the Central Bank of Oman and the most important circulars issued by the bank during the year. The report explains that the Omani economy has recently been characterized by remarkable progress in terms of overall recovery, and this is clearly evident in continuing efforts to overcome the economic repercussions and global geopolitical tensions.
This is attributed to the growth of the domestic product, with output from petroleum activities showing a remarkable growth of 10.2 percent, supported by a growth of 5.9 percent in natural gas production. Among non-oil industrial activities, the output of the manufacturing sector in real terms grew by 17 percent, with mining and quarrying and electricity and water supply sectors recording growth of 10.5 percent and 4.5 percent, respectively.
In the services sector, hotel and food services, transportation and storage, and wholesale and retail trade showed strong growth in real output during 2022, which indicates a recovery in services based on direct contact.
In contrast, the output of the construction sector and agriculture and fishing decreased in real terms by 23.2 percent and 9.7 percent, respectively.
The inflation rate during 2022 remained low at the local level, i.e. much lower than the global average, benefiting from the monetary policy framework, fixed exchange rate regime and fiscal policy measures, as the average consumer price inflation reached about 2.8 percent in 2022, compared to 1.6 percent in 2021.
Given the Sultanate of Oman’s dependence on imports to meet a large portion of daily demand, global inflationary conditions had a significant impact on domestic prices. However, the impact of global inflationary pressures on domestic inflation was contained to some extent by the rise in the nominal effective exchange rate of the Omani Rial, which recorded an increase (on an annual basis) by 6.3 percent in December 2022 amid the rise in the value of the US dollar, in addition to government interventions that largely maintained moderate levels of domestic inflation compared to the rise in global inflation.
The public finances of the Sultanate of Oman achieved a remarkable positive financial performance during the year 2022, exceeding the performance of previous years, and driven by the rise in oil prices and the corrective measures taken by the government. Crude oil prices in 2022 exceeded the levels recorded in the previous year, as the average price of Omani oil in 2022 reached about 95.4 US dollars per barrel, an increase of 48.4 percent from what it was a year ago. Oil production during the year also increased by 9.6 percent compared to 1.9 percent in 2021.
These developments have created financial space for the government to direct it towards productive spending while remaining on the path of financial control stipulated in the medium-term fiscal balance plan.