Oman: Selected Issues

This Selected Issues paper proposes policy options to accelerate Oman’s transition to a more sustainable and resilient economic model. With hydrocarbon reserves being limited and uncertainty surrounding future oil prices, it is critical to foster the emergence of a competitive and diversified tradables sector. While current diversification efforts have laid important groundwork, further progress is needed to ensure economic resilience to oil price volatility. Oman faces a critical juncture in its development path. Reducing dependence on hydrocarbon revenues and building a diversified, sophisticated export base will be central to achieving the ambitions of Vision 2040. Building a competitive nonhydrocarbon export sector is essential, as nonhydrocarbon output consists primarily of nontradables, particularly of low-added value sectors requiring low-skilled labor, with limited productivity gains, foreign currency receipts, and employment potential. Accelerating structural reforms alongside well-targeted state support will be key to enhance product sophistication and deepen export diversification beyond oil and gas. The empirical analysis indicates that improvements in government effectiveness and logistics performance could significantly raise nonhydrocarbon exports.