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, compared 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||73.3||75.2||77.8|
|Consumer price inflation, % y-o-y, eop||0.8||-0.1||1.0||2.0|
|Exchange rate OMR/USD, eop||0.39||0.38||0.38||0.38|
|Budget balance, % of GDP||-3.4||-17.8||-16.3||-12.8|
|Current account balance, % of GDP||5.0||-13.5||-13.2||-8.2|
Assess your risk exposure in Oman, Yemen with our 100% independent forecasts assessing the pace and stability of this key market. Backed by trusted data from BMI Research's 52 million data point economic forecast model, this report will allow you to measure political, economic, business environment and operational risks in Oman, Yemen with confidence.
Your subscription service includes:
- Delivery of the report in print and PDF
- Online access for 12 months
- The functionality to translate your online report into your choice of 10 languages - Arabic, Chinese, French, German, Italian, Japanese, Korean, Portuguese, Russian and Spanish
- The ability to export data and graphs from the online report directly into your workflow
- The support of a dedicated Account Manager to answer any questions you might have about your subscription
- Access to our team of leading analysts who will be happy to answer any questions you might have about the data and forecasts included in this report