Oman’s economy grew 3.0 per cent in real terms last year according to official estimates, higher than the 2.2 per cent growth we had expected. The oil and gas sector expanded 4.1 per cent while non-oil growth reached 2.2 per cent after contracting -4.0 per cent in 2020.
With a higher base in 2021, we now expect Oman’s economy to grow 4.0 per cent this year (from 4.5 per cent previously), with non-oil growth accelerating to 3.3 per cent and oil and gas GDP rising to 5.0 per cent. Oil production in Oman has exceeded 1m b/d since December 2021, and the finance ministry had indicated that this level of production would be maintained through 2022.
Budget moves into surplus
The Ministry of Finance said the country posted a RO 210m budget surplus in the first two months of the year, compared with RO 457m deficit a year earlier. Both oil and non-oil revenues increased, the latter reflecting income from VAT which was introduced last April.
Public spending rose 10.2 per cent y/y on year to RO 1.7bn driven by interest payments, investments for civil ministries and gas purchases. We expect the budget to record a surplus of 7 per cent of GDP in 2022, from a deficit of -3.7 per cent in 2021.
Ratings upgrade
Oman's 2022 budget allocated RO 4bn to meet debt obligations, including the repayment of RO 2.7bn loan principals and payment of RO 1.3bn in loan interests. Oman repaid RO 1.49bn of loans at the end of March, including an RO 850m loan prior to its maturity, the finance ministry said. Oman is also preparing to pre-pay RO 1.36bn worth of loans at the end of this month, according to the ministry.
Earlier this month S&P Global Ratings upgraded Oman’s long-term sovereign debt rating to ‘BB-’ from ‘B+’, citing higher oil prices, rising hydrocarbon production and the government’s fiscal reform programme. The credit rating agency also revised the country's outlook to stable, noting that the stable outlook balances the significant improvement in the government’s balance sheet over the next three years against higher medium-term fiscal pressure. The agency expects that government net debt will narrow to 12 per cent of GDP in 2025, a sharp improvement from a previous forecast of above 30 per cent.
Khatija Haque - Head of Research & Chief Economist, Emirates NBD Research
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