Minor Fall in Oil & Gas Output Leads to Mild Contraction of Oman’s Economy

Oman’s real GDP – gross domestic product at constant prices – experienced a slight contraction of 0.2% in the second quarter of 2023 compared to the corresponding period of the previous year.

The sultanate’s economy, however, entered this year on a positive note, expanding at a growth rate of 4.7% in the first quarter of 2023, outpacing the average growth rate of the previous year, driven by non-oil output, which expanded by 4.6%.

According to the official data released on Thursday, the mild contraction in real GDP in the second quarter can be attributed to a minor decrease in oil and gas production.

The real GDP decreased marginally to RO8.431 billion (US$21.90 billion) in the second quarter of 2023, down from the RO8.448 billion (US$21.94 billion) recorded during the same period in the previous year, according to the data released by the National Center for Statistics and Information (NCSI).

Oman’s petroleum GDP, encompassing both oil and gas output, contracted by 0.7% in the second quarter, reaching RO2.927bn, compared to RO2.947 billion (US$7.65 billion) in the corresponding period a year ago.

Non-petroleum GDP saw a slight increase of 0.1%, reaching RO5.830 billion (US$15.14 billion) during the second quarter of 2023, compared to RO5.823 billion (US$15.12 billion) in the second quarter of 2022.

Breaking it down further, industrial activities within the non-petroleum sector contracted by 2.9% to RO1.528 billion (US$ billion) from RO1.574 billion (US$4.09 billion) in the same period the previous year. Meanwhile, the services sector experienced growth of 1.3% in the second quarter, reaching RO4.090 billion (US$10.62 billion).

Nominal GDP shrinks 9.5%

Oman’s nominal GDP – which is calculated at current market prices – saw a substantial 9.5% decline, dropping to RO10.085bn in the second quarter of 2023 from the RO11.146 billion (US$28.94 billion) recorded during the same period in the previous year.

Nominal petroleum GDP contracted by 18.3%, falling to RO3.646 billion (US$9.47 billion) in the first quarter, while nominal non-petroleum GDP decreased by 3.6% to RO6.861 billion (US$17.82 billion).

For the full year 2023, the government’s estimates in January had projected Oman’s real GDP to grow by 5.5%, mainly due to an expected increase in oil and gas production. As per government estimates, hydrocarbon GDP is projected to grow by 10.1%, and non-hydrocarbon GDP is expected to grow by 2.9% this year.

However, international institutions such as the International Monetary Fund (IMF), the World Bank, and global credit rating agencies have estimated that Oman’s 2023 economic growth will remain significantly lower than the previous year, mainly due to an expected decrease in oil output owing to an OPEC+ decision, of which Oman is a member.

The IMF recently stated that the sultanate’s economic growth is projected to slow down to 1.3% in 2023 and then rebound to 2.7% in 2024, reflecting oil production cuts by OPEC+ and moderate growth in the non-hydrocarbon sector.

Last week, a new report commissioned by the Institute of Chartered Accountants in England and Wales (ICAEW) and compiled by Oxford Economics revealed that Oman’s economy is expected to expand ‘moderately’ in 2023.

While Oman’s non-oil economic activities are forecasted to grow by 2.9%, up from 1.6% last year, headwinds in the oil sector, driven by OPEC+ policy changes, will cause the sultanate’s 2023 GDP growth to slow to 2.5% year-on-year compared to the 4.3% growth in 2022, the ICAEW report said.

According to this report, in alignment with the OPEC+ agreement, Oman is expected to reduce oil output to 1.042 million barrels per day this year, down 2.1% from last year, with further adjustments anticipated in the coming year.