Muscat – S&P Global Ratings has forecasted Oman’s economic growth to accelerate from next year supported by higher oil and gas production and non-oil sector growth.
‘We expect Oman’s real GDP to grow by 1.7 per cent this year and then accelerate to 3.1 per cent on average in 2022-2023 as oil and gas production ramps up after OPEC+ production limits are eased,’ S&P said in a research update report released on Saturday.
A stronger economic rebound from 2022, the ratings agency said, will be supported by higher oil and gas output and non-oil sector growth.
A stronger rebound in non-oil sector growth will come from the logistics, manufacturing, agriculture and fisheries, and tourism sectors.
‘That said, we could see downside risks to our forecasts from a slower-than-expected global economic recovery and the spread of COVID-19 variants,’ S&P added.
It said the economic activity will start to pick up this year. However, given the ongoing oil production limits under the OPEC+ agreement, COVID-19-induced lockdown measures, and the slow pace of vaccinations to mid-2021, it expects only a mild economic recovery of about 1.7 per cent this year.
‘Notwithstanding OPEC+ quotas on crude oil production, Oman has increased its volumes of condensates that are not covered under the agreement. The vaccination roll out has picked up in recent months, so that 52 per cent of the population were fully vaccinated at the end of September, and authorities have gradually eased restrictions on movement and travel,’ S&P noted.
‘The government also announced an economic stimulus plan (of about 0.1 per cent of GDP) that includes incentives on taxes and fees for private sector companies, particularly small and mid-size enterprises,’ the ratings agency added.
S&P expects Oman’s oil and condensates production will rise to 1mn barrels per day (bpd) in 2022 as OPEC+ production limits are eased, and 1.1mn bpd in 2023, from 0.96mn bpd in 2021. According to government estimates, gas production will ramp up from 157mn cubic metres per day in 2021 to 174mn cubic metres per day in 2023.
Given the concentrated nature of Oman’s economy – hydrocarbon products comprise about 40 per cent of real GDP, 60 per cent of goods exports, and above 70 per cent of fiscal receipts – the country remains sensitive to movements in oil prices in either direction, S&P said.
S&P assumes an average oil price of US$60 per barrel in 2021 (based on realised sales of Omani crude until October) and 2022 and US$55 from 2023, up from US$42 in 2020.
After a substantial increase in the budget deficit in 2020, S&P expects a sharp narrowing in Oman’s budget deficit in 2021. ‘We expect fiscal deficits will average about 4.6 per cent of GDP over 2021-2022 and increase to 6 per cent over 2023-2024, based on our assumption that oil prices will decrease by U$5 per barrel over this period.’