Oman Economic Forecast

The economy grew 4.3% last year. The expansion was led by the oil sector, which grew 10.2%. The non-hydrocarbons sector expanded 1.6%, with services output rising 5.0%. Heading into 2023, the hydrocarbons sector appears to have weakened, with oil output close to stagnant in January–April compared to 2022. That said, LNG exports were up 23% in January–February, providing some respite. The non-hydrocarbons sector may be faring better, with inflation having ticked down in the year so far. In other news, Moody’s bumped up the government’s credit rating a notch to ‘Ba2’ in mid-May and kept a positive outlook, citing stronger fiscal metrics as a result of energy prices rising sharply last year. Bearing out this conclusion, in late May, the government announced it had a 2.7% of GDP budget surplus in 2022—the best result in nearly 10 years.

Inflation fell to 1.2% in April (March: 1.6%). Inflation should remain soft this year, averaging the lowest in the Gulf region. The key factors behind the softer annual forecast include recent rate hikes, government subsidies and a tougher base effect. Factors to monitor include commodity price swings and potential further government intervention.