The economic outlook for Oman in 2024 is positive, with the country targeting at least 3% economic growth for the year. Key indicators include a rebound in economic growth, supported by higher hydrocarbon production and more robust non-hydrocarbon growth. The IMF expects the GDP growth to recover to 2.7% in 2024, following a slowdown in the previous year. Oman forecasts a budget deficit of RO 640 million ($1.66 billion) in 2024, which is 6% of the total revenue, with total revenues projected at RO 11.01 billion, up 9.5% from 2023 estimates.
The economy is expected to rebound in 2024, supported by higher hydrocarbon production. The petroleum sector is likely to grow, although it may be subject to fluctuations in oil prices and production quotas. The main sectors expected to drive Oman's economic growth in 2024 include higher hydrocarbon production and more robust non-hydrocarbon growth. In the first half of 2023, the non-hydrocarbon growth accelerated from 1.2% in 2022 to 2.7%, supported by recovering agricultural and construction activities and robust services.
The services sector is expected to grow, with bank credit and electricity output showing positive trends. The country aims to maintain inflation rates at moderate levels, around 3%. Various factors influence Oman's economic outlook for 2024. While the government is poised for a rebound in economic growth, it also faces challenges related to oil production and global economic uncertainty.
In 2024, the banking sector will face unique challenges caused by global trends and the macroeconomic environment. These challenges include the impact of divergent and sporadic economic growth, higher funding costs, slower loan growth, declining loyalty, and increasing customer defections. However, the outlook also presents opportunities for scale and stability, potentially leading to more M&A within the banking industry.
While the weak economic outlook for 2024 will test banks' business volumes, asset quality, and financing conditions, earnings for most banks are expected to benefit from high interest rates.
In 2024, Oman's economic growth will be influenced by various factors, and the country will face challenges in some sectors while experiencing growth in others. The economy is highly uncertain due to oil price fluctuations, which can impact the hydrocarbon sector's development and the overall economic outlook. The global economic environment, including inflation, supply chain disruptions, and geopolitical tensions, can influence Oman's economic growth. The ongoing implementation of the new social protection law and phasing out untargeted energy subsidies remain priorities for the country's economic growth. The structural reform agenda under Oman's Vision 2040 is also progressing, with many reforms under implementation.
Oman expects economic growth from 1.6% in 2023 to 2.1% in 2024. However, the Gulf geopolitical developments are creating clouds of doubt. The evolving dynamics of the energy market fluctuations, global market economic slowdown, and changes in US policy rates could impact domestic growth positively or negatively. Therefore, the developing geopolitical dynamics will be crucial in influencing Oman’s economic trajectory in 2024.
Oman Vision 2040 is a strategic initiative to transform the country's economy from oil-dependent to diversified and sustainable. The vision targets various development sectors, including tourism, logistics, manufacturing, and renewable energy, to promote economic diversification, attract investments in non-oil sectors, foster entrepreneurship, and enhance the quality of life for its citizens. A key strategic initiative is Oman's ambitious strategy to derive 30% of electricity from renewable sources by 2030.
In summary, Oman's economy in 2024 is expected to grow in the hydrocarbon and non-hydrocarbon sectors. However, the country faces challenges related to weakening economic growth, oil price volatility, global economic uncertainties, increased interest rates, and implementing reforms. The government aims to emerge as a worldwide energy transition leader, diversifying its exports while reducing its reliance on fossil fuels and lowering its carbon footprint.
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