Oman's GDP growth rate to slip this year on OPEC+ cuts

Oman is forecast to see real GDP growth 1.7% this year, down from 4.3% in 2022, according to Emirates NBD.

The Dubai-based lender said in a note on Thursday that while this is a downgrade from their earlier forecast of 2.8% growth it is in line with the voluntary oil production curbs being implemented as part of the OPEC+ grouping.

On the other hand, the outlook for the non-oil sector remains positive, buoyed by government infrastructure spending, a surge in tourist arrivals, and falling inflation, which the bank forecast will average 1.0% this year, from 2.8% in 2022.

Oman's strong growth in 2022 was driven by the hydrocarbon sector which expanded 10.2%. The non-oil sector was the laggard in 2022 as it grew 1.6%: standout sectors were restaurants & hotels which recorded growth of 17.3%, while manufacturing expanded 28.9%, with manufacturing of chemical and petroleum products growing at a far slower rate. 

For this year the lender says the dynamics of growth in Oman will be reversed due to the voluntary cut of 40,000 barrels per day (b/d) that the country began in May and intends to continue through to the end of 2024 as things stand. Crude oil production averaged 1.07 million b/d in the first quarter, some 30,000 b/d greater than in Q1 last year, "but our expectation over the year is now that oil production will be 3.0% lower in 2022, informing our forecast that hydrocarbon GDP will contract by 2.0%."

For non-oil GDP, Emirates NBD forecasts growth of 3.5% this year, with positive momentum in a range of sectors. One of these is tourism, with the sector bouncing back from the Covid-19 pandemic last year with 2.9 million visitors, marking an increase of 348% year-on-year (YoY) and contributing to the 17.3% growth in restaurants & hotels GDP.

Oman's fiscal conditions too have improved over the past several years. "We estimate that Oman ran a budget surplus equivalent to 4.0% of GDP in 2022, its first in over 15 years, as the GCC benefitted from higher oil prices and a ramp-up in production."

This year the budget will be only moderately negative, at -0.1% in 2023, returning to surplus at 1.0% in 2024, the report said.

Although government debt peaked at 70.0% of GDP in 2020 as the Covid-19 pandemic struck and oil demand fell off a cliff, there has been progress in bringing debt down while conditions have been more favourable, and it fell to 40.1% last year and the government has paid off a further $2.9 billion in loans in the first quarter.




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