Mubasher: The Omani economy is recovering, given the increase in the growth rate of the country’s non-hydrocarbon GDP and the decline in the fiscal deficit, according to a report released by the International Monetary Fund (IMF).

Non-hydrocarbon growth is expected to increase gradually in the medium term to 4% on the back of the GCC country’s endeavours to diversify the economy.

Last year, fiscal deficit declined to 9% of GDP, compared to 13.9% GDP in 2017, following the increase in oil revenue, the IMF report said, adding that deficit would reach 8% in 2019.

“Nonetheless, budget implementation remained challenging, with some spending overruns and tax revenue underperformance compared to the budget. In addition, after several years of improvement, the underlying (non-oil) primary balance deteriorated due to higher spending.”

Over the next two years, Oman’s fiscal deficit may go down 2% after the introduction of the VAT tax.

However, the deficit may rise again, given the expected decline in oil prices or the projected increase in interest payments, pushing up external debt.

“Deeper fiscal consolidation is therefore important to ensure fiscal and external sustainability. The authorities are encouraged to lay out and implement an ambitious medium-term fiscal adjustment plan, based on reforms to tackle current spending rigidities—particularly on the wage bill and subsidies—streamline public investment, and raise non-hydrocarbon revenue.”