Oman’s economy is projected to experience moderate growth in 2023. Starting the year on a positive trajectory, the economy expanded by 4.7 percent year-on-year in the first quarter, surpassing the average growth rate of the previous year. The growth was primarily driven by non-oil sectors, which recorded a robust expansion of 4.6 percent.
According to the latest Economic Insight report, non-oil activities in Oman are expected to grow by 2.9 percent, a significant increase from the 1.6 percent growth observed last year. However, headwinds in the oil sector, influenced by policy changes within OPEC+, will result in a slowdown of GDP growth to 2.5 percent year-on-year (y/y), compared to the 4.3 percent y/y growth achieved in 2022.
The energy sector experienced a slowdown in Oman, growing at a rate of 3.5 percent. Oil output expanded by just 2.8 percent. However, there have been notable rebounds in the fishing, building, and construction sectors, which had faced double-digit contractions in the previous year. Additionally, the services sector has shown growth of 4.5 percent, driven by positive performances in retail, transport, and real estate activities.
Oil output to decrease
In accordance with the OPEC+ agreement, Oman is expected to decrease its oil output this year. The reduction will bring it down to 1.042 million barrels per day (bpd). This reflects a 2.1 percent decline compared to the previous year. Further adjustments are expected in the upcoming year. On the other hand, gas production experienced a 3.4 percent increase in 2022. This upward trend is expected to continue as more projects become operational. This shift in energy trade composition is gradually favoring gas as its share grows.
Tourism poised to drive recovery
Although hotel occupancy rates remain slightly below 2019 levels, tourism is anticipated to be a key sector driving the non-oil economic recovery in the Sultanate. Promising indicators, such as increasing visitor numbers, suggest positive signs of improvement. Additionally, Oman is taking advantage of growth and diversification initiatives in the region. One such initiative is the development of the UAE’s Etihad Rail. This rail project aims to connect Oman, the UAE, and Saudi Arabia, providing enhanced connectivity between these nations. These strategic plans are expected to further bolster Oman’s economic prospects and enhance regional connectivity.
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