Uncertainty over the health of Sultan Qaboos bin Said al-Said, who has governed Oman since 1970, is bringing the succession question to the fore. We see major risks in the succession process. Governance is set to become more unpredictable in the future, and the Omani political system - with the Sultan enjoying all-encompassing powers - is largely unsustainable in its current form.
Tightening liquidity conditions, public spending cuts, and weak export growth will present headwinds for Oman's economy and corporate sector over 2016. Growth will weaken to 2.3% in real terms, comp ared to the annualised rate of 3.5 % recorded between 2010 and 2014.
The fall in oil prices will leave Oman posting budget and current account deficits for years. While the country can rely on the debt and loan markets for the time being, the need to implement new taxes and curb spending will test the regime's popularity.
Oman is well positioned to benefit from improvements in Iran's relations with the West. The relaxation of the international sanctions regime on Iran will provide an upside factor for Omani exports and investment inflows.
The escalating tensions between Iran and Saudi Arabia threaten to undermine Oman's long held position of regional neutrality. Although the country's careful balance between Tehran and the rest of the Gulf is likely to be maintained as long as Sultan Qaboos bin Said is in power, his successor could struggle to navigate the same middle ground.
Government efforts to attract Omani nationals to the private sector (known as 'Omanisation') will continue to meet with limited success. We expect the government to adopt a more flexible approach over the coming years to accommodate the concerns of companies amidst a weakening economy. In the long term, improvements in education will be a more effective driver of job creation than strict 'Omanisation' targets.
Dropping the rial's peg to the US dollar would provide little benefit to the Omani economy, and is not our core scenario. Nevertheless, the risk of a forced devaluation will grow throughout the coming years, given the deterioration in Oman's fiscal and external dynamics and the country's low foreign reserve buffers.
|Real GDP growth, % y-o-y||2.9||3.2||2.3||2.5|
|Nominal GDP, USDbn||81.7||72.5||74.1||76.7|
|Consumer price inflation, % y-o-y, eop||0.8||-0.4||1.0||2.0|
|Exchange rate OMR/USD, eop||0.39||0.39||0.39||0.39|
|Budget balance, % of GDP||-3.4||-15.9||-15.9||-12.1|
|Current account balance, % of GDP||5.0||-10.7||-11.3||-6.2|
The Oman and Yemen Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Oman, Yemen. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.
An influential new analysis of Oman, Yemen's economic, political and financial prospects through end-2019, just published by award-winning forecasters, BMI Research.
- Forecast the pace and stability of Oman, Yemen's economic and industry growth through end-2019.
- Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
- Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
- Contextualise Oman, Yemen's country risks against regional peers using BMI's country comparative Risk Index system.
- Evaluate external threats to doing business in Oman, Yemen, including currency volatility, the commodity price boom and protectionist policies.
BMI provides our fully independent 5-year forecasts for Oman, Yemen through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.
Economic Outlook Contents
The Oman and Yemen Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.
Key Areas Covered:
- Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
- BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.
- Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
- Balance of Payments - trade and investment, current and capital account.
- Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
- Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
- Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
- Foreign Direct Investment - approvals, inflows and climate.
- External Debt - debt profile (short and long-term plus public and private sector obligations).
- Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.
- Rely upon BMI's 100% independent forecast scenarios for Oman, Yemen and underlying assumptions - we take no advertising and are privately-owned.
- Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Oman, Yemen, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
- Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.
What are the political risks to doing business in Oman, Yemen over the next 5-years?
BMI's Oman, Yemen country Risk Index evaluates the short- and medium-term threats to political stability.
Political Outlook Contents
- SWOT Analysis for the Oman, Yemen Market - Political Strengths, Weaknesses, Opportunities and Threats facing Oman, Yemen.
- Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for Oman, Yemen's risk are compared with regional and global averages.
- Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
- Long-Term Political Outlook BMI examines the structural risks to the stability of Oman, Yemen’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.
- Benchmark Oman, Yemen's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
- Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
- Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.
What are the current operational risks and difficulties associated with doing business in Oman, Yemen?
The Operational Risk section gives an evaluation of current risks and difficulties associated with operating in the market. It also provides a brief overview of the regional Operational Risk Index which benchmarks Oman, Yemen against its neighbours.
Operational Risk Contents
The chapter provides a summary of the main threats in the country, within:
- Labour Market Risk (Education; Availability of Labour; and Labour Costs)
- Logistics Risk (Market Size and Utilities; Quality and Extent of the Transport Governance)
- Trade and Investment Risk (Economic Openness; Government Intervention; and Legal Risks)
- Crime and Security Risk (Crime; Terrorism; and Interstate Conflict risks).
The report also drills down in greater depth to address key issues in one of the following segments most critical to the market:
- Transport network, economic openness, cost and availability of labour, crime risks, bureaucratic environment, market size and utilities, and interstate conflict.
- Assess your company’s exposure to country specific operational and business risks, using BMI’s insight on the current dangers of operating in the market.
- Evaluate Oman, Yemen’s risk profile against its regional peers, helping you understand the market’s strengths and weaknesses in relation to other countries.