Muscat – Oman’s non-oil exports will continue to post robust performance in 2023 as more production capacity is expected to become available for export in the mining, plastics and chemicals sectors, according to Fitch Solutions, a leading global provider of economic research.
Fitch Solutions has revised up its 2023 forecast for Oman’s current account surplus from 3.9 per cent of GDP to 5.1 per cent of GDP due to its more bullish outlook for non-hydrocarbon exports.
“We expect non-hydrocarbon exports will continue to post robust performance in 2023, which will more than offset the [expected] decline in hydrocarbon exports. We hold a more bullish view on non-hydrocarbon exports in 2023 as we think more production capacity will become available for export in the mining, plastics and chemicals sectors,” Fitch Solutions said in a research note.
Oman’s trade data for the first eight months of 2022 showed that non-hydrocarbon exports, particularly minerals and plastics, continued to surprise to the upside, growing by a staggering 48.6 per cent year-on-year in the January – August period this year.
As noted by Fitch Solutions, Oman’s Ministry of Energy and Minerals has already launched a bidding block for four mining sites back in April 2022, with three more sites made available for investment in October. Similarly, OQ Group has continued investing in additional production capacity for plastics, with the establishment of a plastics park in Sohar Industrial City in partnership with the Public Establishment for Industrial Estates (Madayn).
Fitch Solutions also estimates a significant increase in Oman’s chemicals production after ammonia production started at OQ’s Dhofar plant in September 2022.
“These efforts will increase non-hydrocarbon exports to an all-time high of 26.9 per cent of GDP in 2023, and offset the decline in hydrocarbon exports. As a result, we expect total exports will increase from 59.8 per cent of GDP in 2022 to 60.4 per cent in 2023,” Fitch Solutions noted.
While Oman has a diversified set of export partners, a sharper-than-expected decrease in global economic growth could weigh on non-hydrocarbon exports, Fitch Solutions warned.
Fitch Solutions expects import growth in 2023 will outpace export growth, thus shrinking the sultanate’s current account surplus.
“At Fitch Solutions, we forecast Oman’s current account surplus will narrow from a decade high of 7.7 per cent of GDP 2022 to 5.1 per cent in 2023. We have increased our 2022 estimate and 2023 forecasts from 7.1 per cent and 3.9 per cent, respectively, as we now foresee stronger hydrocarbon exports in both years,” it said.
As per Fitch Solutions’ forecasts, Oman’s imports will rise from 32.7 per cent of GDP in 2022 to 35.7 per cent in 2023 due to strong capital imports, reducing the surplus in the goods trade surplus.
“We believe a strong investment drive will keep import growth elevated as the government seeks to diversify sources of economic activity. This will add to a weaker dollar, which will increase Oman’s import prices by virtue of the sultanate’s currency peg,” Fitch Solutions said.
Although overall imports will increase, a decline in global commodity prices along with favourable base effects will lead to a deceleration in import growth from 27.8 per cent in 2022 to 12.2 per cent in 2023, Fitch Solutions added.