Oman: Risk Assessment
Country Rating1
Rating: A3
Business Climate Rating1
Rating: A4
Risk Assessment2
Continued strong growth in 2011
The GDP growth achieved by the Sultanate of Oman in 2010 was among the strongest in the region thanks particularly to active economic diversification policy. Gas and crude oil production moreover reached record levels, moreover, despite a reduction of nearly 20% in investment in the two sectors in 2009 and the failure of several major gas exploration projects. The increase in production came in response to the growth of demand from emerging Asian-Pacific countries, increasingly dependent on hydrocarbon imports from Gulf countries.
In 2011, Oman's crude oil exports to China, Japan, and South Korea are expected to grow faster than those from the other oil exporting countries. Since the Sultanate is not an OPEC member, it can capitalize on the expected increase in crude prices. The non-oil economy is also expected to grow, driven by investments underway and the stepping up of public spending. Growth will be strong in the construction sector, driven by projects in industry and tourism. The manufacturing sector will continue to benefit from new industrial facilities.
A healthy financial position
Hydrocarbons continue to generate the majority of fiscal revenues and exports.
Public accounts showed a surplus again in 2010 thanks to an increase in tax receipts resulting from the acceleration of economic growth and the rise in oil revenues. And the rise of prices and export volumes enabled the current account balance to show a large surplus. Non-oil exports increased moreover with the expansion of the manufacturing sector, which now generates about one third of goods exports.
In 2011, the fiscal surplus will likely decline slightly with the continuation of a major public spending programme intended above all to foster economic diversification, especially via the promotion of renewable energy, manufacturing, and tourism.
As regards external accounts, the growth of imports, largely attributable to strong demand for consumer goods, will be largely offset by the growth of exports, buoyed by strong barrel prices and development of port operations. This will enable the continuation of substantial trade and current account surpluses.
In this context, the public debt will remain very limited, with foreign debt remaining moderate. Furthermore, in addition to the foreign-exchange reserves held by the Central Bank, the Sultanate holds financial assets abroad managed by a reserve fund, which would make it possible if necessary to cushion possible external shocks.
A stable political situation and acceptable business environment
The good resilience demonstrated by the Oman economy during the crisis and its marked rebound in 2010 have strengthened the legitimacy of Sultan Qaboo bin Said and his influence in the region, where he intends to play a mediator role between the Western powers and Iran. Continuing to pursue liberal and balanced policies, the Sultan celebrated in 2010 the 40th anniversary of his accession to power. This model of governance in the region, in conjunction with the attractiveness of the tax regime and the durability of Oman's stable political situation, has thus enhanced the attractiveness of the Sultanate. Uncertainty nonetheless surrounds the succession to the Sultan, who will be 70 in 2011, with no successor officially named at this juncture.
Strengths
- Economically diversified (oil, gas, petrochemicals, steel, tourism, and port operation) and open to foreign investment
- Political stability
- Oil reserve fund for future generations futures
- Major infrastructure investments
Weaknesses
- Depletion of hydrocarbon reserves
- Exposure to fluctuations in oil prices
- Dependence on human resources from abroad
- Lack of job creation