São Paulo – The International Monetary Fund (IMF) recommended on Wednesday (28) that authorities of Oman make an effort to reduce the country’s unemployment rate, currently at 24.4% of the working population. This is one of the conclusions of Fund technicians after inquiries and meetings with local authorities.
In the mission to Oman, the IMF projects that the country should have growth of 5.5% in Gross Domestic Product (GDP) this year and praised local authorities for their effort in diversification of the country’s revenue sources. The GDP of the non-oil sector should grow 6.4% this year.
According to Fund technicians, inflation is under control and should end the year at 4.1%. Furthermore, the report says that Oman was little affected by the economic crisis as 80% of exports are turned to Asian nations, which were less affected by global turbulence.
According to the IMF, the banking system of Oman is capitalising. “Stress tests conducted by the central bank of Oman indicated that most banks are in a position to face significant macro-economic shocks,” according to the report.
The IMF points out, however, that the main risk to the country in the medium term would be a drop in oil prices. The fund forecasts that the price of the barrel of oil should be US$ 81 in 2012, rising to US$ 105 in 2016. The fund warns, however, that if prices drop, Oman will be obliged to reduce expenses and growth in the non-oil sector. In 2011, Oman should export US$ 31.4 billion in oil and gas, a value that should reach US$ 32.3 billion in 2012 and drop to US$ 27.4 billion in 2016, according to Fund projections.
Although oil and oil products are still the main export product to Oman and its main source of income, the IMF observes that the local government is making an effort to diversify the economy. Metals, fertilizers and petrochemical products already answer to 20% of exports. However, the rate of unemployment is still high.
According to the IMF, Oman would have to create 45,000 work posts in the private sector each year to reduce unemployment. In 2011, 44,000 work posts were created in the public sector, which should open another 36,000 jobs in 2012. However, according to the IMF, these opportunities only “alleviate tensions in the short term, not solving the problem.”
The IMF also recommends that the Central Bank of Oman proceed with its efforts to reduce excessive liquidity and high public spending to control inflation. The institution praised the parity between the Omani rial and the dollar, adopted by the local government. This measure, according to the IMF, has granted credibility to the monetary system.
The study is the result of a yearly meeting by between IMF technicians and countries that are members of the institution. At the end of the meetings and after accessing economic data of the countries, IMF employees present the meeting results.
*Translated by Mark Ament
