Gap Alert: Labour Productivity
Severity: AMBER
Labour productivity growth has recovered to 0.8 percent but remains below the 1-2 percent target range for 2030.
Gap Analysis
Productivity growth turned positive after a negative 2017 baseline of -1.2 percent, but the recovery has been tepid. The economy continues to create a disproportionate share of jobs in low-productivity sectors such as retail, construction, and personal services, which dilutes aggregate productivity gains. Capital deepening is insufficient as investment-to-GDP ratios have been declining. The low-cost expatriate labour model actively discourages automation and technology adoption.
What Needs to Change
Shift investment toward capital-intensive, technology-enabled sectors. Remove barriers to automation adoption, particularly in SMEs. Reform the labour-sponsorship system to reduce reliance on cheap, low-productivity expatriate labour. Invest in digital infrastructure to enable productivity gains across all sectors.
Risk Assessment
Low productivity growth is the binding constraint on per-capita income convergence. Without acceleration, the real-GDP-per-capita target becomes mathematically unachievable. Amber severity reflects the tractable but urgent nature of the gap. This KPI has cascading implications for multiple other Vision 2040 targets.
Recommended Interventions
Priority interventions: launch a national productivity centre to benchmark and disseminate best practices; provide tax incentives for capital investment in automation and AI; reform the expatriate-levy structure to make low-skill hiring progressively more expensive; and expand the Technology Transfer Office programme to commercialise university research.
This gap alert is issued by the Oman Vision 2040 Research Unit and is updated quarterly. Severity levels: GREEN (on/ahead of track), AMBER (gap widening but recoverable), RED (structural gap requiring urgent intervention). Data sources include NCSI, World Bank WGI, IMF, and relevant international indices.