Oman Economic Forecast

GDP growth clocked in above its 10-year average in 2022, and accelerated further in Q1 2023. Momentum came from the non-hydrocarbons sector: Agricultural, industrial and services output all improved. Conversely, the hydrocarbons sector slowed, and appeared to do so further in Q2 2023: Crude output dipped year on year in the quarter due to a production cut agreed with other OPEC+ members effective until end-2024. Meanwhile, the non-hydrocarbons sector faced two opposing forces. While inflation dipped to just 0.6% in June, boding well for private spending, interest rates continued to rise due to the currency peg to the U.S. dollar, restricting domestic demand. In other news, the government reported a budget surplus of 656 million Omani rials (USD 1.7 billion) in H1, boding well for investor confidence and the country’s credit rating, which was upgraded by Moody’s in May.

Inflation fell to 0.5% in July (June: 0.6%) and should remain low ahead, averaging among the softest in the Gulf region this year owing to government subsidies and a tougher base effect. Key factors to watch include commodity price fluctuations and changes to government price controls and subsidies.