Meed | Muscat’s efforts right the economy

Muscat’s efforts right the economy

19 December 2024

Commentary
John Bambridge
Analysis editor

Oman’s economic transformation under its Vision 2040 strategy appears to be coming into its own as of 2024, with various economic indicators turning highly positive for the sultanate, not least in the form of a reviving projects sector and burgeoning pipeline of strategic infrastructure schemes.

To support its economic diversification and growth, the sultanate has meanwhile embarked on a renewed investment drive, as exemplified by its launch of the Future Fund Oman, a $5bn initiative designed to invigorate small and medium-sized businesses while drawing international capital.

So far, initial investments appear to have borne considerable fruit, with the $571m spent by the fund leveraging an additional $1.6bn from foreign investors and creating over 1,600 direct jobs in the process. The government is simultanously working to attract domestic and international investors to its state-controlled enterprises, as evidenced by the slew of recent initial public offerings on the Muscat Stock Exchange.

The sultanate is also actively pursuing the expansion of the mining and minerals sector through Minerals Development Oman (MDO), a subsidiary of Oman Investment Authority established in 2017. MDO’s local investments in extractive industries are in turn stimulating foreign direct investment interest downstream in the metals refining sector – with a recent example being the late October sealing of a $627m joint venture between Brazilian mining major Vale and China’s Jinnan Iron & Steel Group to establish an iron ore concentration plant in the northern city of Sohar.

In the utilities sector, Muscat continues to pursue the expansion of its renewable energy and water production capacity with a view to achieving 30% renewable electricity generation by 2030. This capacity growth is in turn creating demand for interconnectivity projects capable of unifying the sultanate’s disparate grids.

The sultanate also had its best year for construction and transport contract awards for nearly a decade in 2024. The $4.1bn of awards let by November had already exceeded the $3.6bn awarded in 2023 – marking the first time that the market has exceeded $4bn since 2015.

In September, S&P Global Ratings signalled the success of government policy initiatives by upgrading Oman’s sovereign credit rating from a junk to investment grade – finally reversing the negative trend in sentiment that began in 2016 following the 2015 falling away of oil prices.

This final development is an extremely positive one for the sultanate, once again unlocking cheaper external financing options for the country. Alongside a glowing review by the Washington-based IMF, it signals that Muscat’s economic policy is pointed firmly in the right direction.