The inhabitants of the area of Oman have long prospered from Indian Ocean trade. In the late 18th century, the nascent sultanate in Muscat signed the first in a series of friendship treaties with Britain. Over time, Oman's dependence on British political and military advisors increased, although the Sultanate never became a British colony. In 1970, QABOOS bin Said Al-Said overthrew his father, and has since ruled as sultan, but he has not designated a successor. His extensive modernization program has opened the country to the outside world, while preserving the longstanding close ties with the UK and US. Oman's moderate, independent foreign policy has sought to maintain good relations with its neighbors and to avoid external entanglements. Inspired by the popular uprisings that swept the Middle East and North Africa beginning in January 2011, some Omanis staged demonstrations, calling for more jobs and economic benefits and an end to corruption. In response to those protester demands, QABOOS in 2011 pledged to implement economic and political reforms, such as granting legislative and regulatory powers to the Majlis al-Shura and increasing unemployment benefits. Additionally, in August 2012, the Sultan announced a royal directive mandating the speedy implementation of a national job creation plan for thousands of public and private sector Omani jobs. As part of the government's efforts to decentralize authority and allow greater citizen participation in local governance, Oman successfully conducted its first municipal council elections in December 2012. Announced by the Sultan in 2011, the municipal councils have the power to advise the Royal Court on the needs of local districts across Oman's 11 governorates. The Sultan returned to Oman in March 2015 after eight months in Germany, where he received medical treatment. He has since appeared publicly on a few occasions.
Middle East, bordering the Arabian Sea, Gulf of Oman, and Persian Gulf, between Yemen and the UAE
petroleum, copper, asbestos, some marble, limestone, chromium, gypsum, natural gas
Population - distribution
the vast majority of the population is located in and around the Al Hagar Mountains in the north of the country; another smaller cluster is found around the city of Salalah in the far south; most of the country remains sparsely populated
Arabic (official), English, Baluchi, Urdu, Indian dialects
MUSCAT (capital) 838,000 (2015)
- Conventional long form
- Sultanate of Oman
- Conventional short form
- Local long form
- Saltanat Uman
- Local short form
- Geographic coordinates
- 23 37 N, 58 35 E
- Time difference
- UTC+4 (9 hours ahead of Washington, DC, during Standard Time)
has not submitted an ICJ jurisdiction declaration; non-party state to the ICCt
Oman is heavily dependent on its dwindling oil resources, which generate 84% of government revenue. In 2016, low global oil prices drove Oman’s budget deficit to $11.5 billion, or approximately 19% of GDP. Oman has limited foreign assets and is issuing debt to cover its deficit.
- Total tax rate (% of commercial profits)
- Real Interest Rate
- Manufacturing, value added (% of GDP)
- Current Account Balance
- US$ -10,807,111,387
- Labor Force, Total
- Employment in Agriculture
- Employment in Industry
- Employment in Services
- Unemployment Rate
- Imports of goods and services
- US$ 36,666,579,974
- Exports of goods and services
- US$ 39,166,189,857
- Total Merchandise Trade
- FDI, net inflows
- US$ -2,691,547,464
- Commercial Service Exports
- US$ 3,483,416,793
dates, limes, bananas, alfalfa, vegetables; camels, cattle; fish
crude oil production and refining, natural and liquefied natural gas production; construction, cement, copper, steel, chemicals, optic fiber
- petroleum, reexports, fish, metals, textiles
- China 42.4%, UAE 12%, South Korea 7.4%, Saudi Arabia 5.2% (2015)
- machinery and transport equipment, manufactured goods, food, livestock, lubricants
- UAE 38.3%, Japan 6%, India 5.6%, China 5.2%, US 5%, Saudi Arabia 4.1% (2015)
- Country Risk Rating
- Political and economic uncertainties and an occasionally difficult business environment can affect corporate payment behavior. Corporate default probability is appreciable.
- Business Climate Rating
- The business environment is acceptable. Corporate financial information is sometimes neither readily available nor sufficiently reliable. Debt collection is not always efficient and the institutional framework has shortcomings. Intercompany transactions may thus run into appreciable difficulties in the acceptable but occasionally unstable environments rated A4.
- Strategically located on the Straits of Ormuz
- Economy undergoing diversification (petrochemicals, steel-making, port activity, tourism)
- Sound banking system and open to foreign investment
- Diminution of hydrocarbon reserves and increased exposure to their price fluctuations
- Inadequately qualified local labor force, hence the private sector's dependence on foreign labor
- Succession of Sultan Qaboos still uncertain
Oil prices weakness had a significant impact on Omani economy, which posted a sharp slowdown in 2016. Crude oil production surged to a record high and reached 1 Mb/d thank to the implementation of the Khazzan project that boosted production by 5%. However the rise in the oil sector has struggled to offset the slowdown in the non-oil economy. Budget cuts coupled with a poor outlook for the non-oil sector depressed investment. Household consumption, which remains one the main driver of the economy, has also stalled following the freeze on civil service recruitment and sluggishness in the private sector. Household confidence hit a low point in January 2016. As a consequence, the distribution sector that rely on consumer spending dipped slightly while the construction remained robust. The situation is unlikely to change much in 2017. Authorities are expected to pursue budget cuts and maintain the moratorium on recruitment. Furthermore, the introduction of new taxes could depress the household purchasing power. Investment is also expected to be undermined by fiscal austerity measures as a significant portion of the budget is likely to be allocated to current expenditure. Projects that have not yet started could be cancelled. Inflation has been moderate in 2016 but it is likely to accelerate in 2017 on the back of higher water and electricity prices.
Public deficit declined slightly in 2016 but it remains sizeable. The weak oil prices led to a contraction in fiscal revenues that had been partly offset by the efforts made by the authorities. Indeed, while income was down by 13%, spending fell by 12%. As for 2017, the slight recovery in oil prices is expected to improve fiscal revenues which are heavily depending on oil income. Non-oil incomes are however expected to endure the downturn in economic activity. In response to the fall in public income, the authorities are planning to increase taxes and charges on labor, as well as to introduce GCC-wide VAT, which is due to be implemented in the second half of 2017. Investment spending will, moreover, be limited to the projects already begun. Likewise, current spending, which accounts for three quarters of the State budget, is set to fall. The freeze on public wages and the halt to recruitment will be extended. The size of the public deficits will result in a considerable increase in the debt in 2017, even though it grew by more than 50% in 2016 following the signing of a syndicated loan agreement for USD 1bn from a consortium of foreign banks and a bond issue of USD 2.5bn. The authorities are expected to continue to tap on international debt market to respond to their financing needs but the recent downgrades of the Sultanate's sovereign debt by the rating agencies could increase the cost of debt service in the medium term.
The banking system has been facing a liquidity squeeze caused by slower deposits and higher public borrowing. The banks, whose profitability has remained high, could see a narrowing of their margins and an increase in non-performing loans.
Having peaked in 2016, the current account deficit will still be high in 2017. After oil export shirked, import needs can no longer be covered by the export values, and the trade balance will therefore enter negative territory. The authorities are, however, unlikely to review the peg of the Omani rial to the dollar, even though the hike in US rates will increase speculative pressures on a potential unpegging.
Although political risk will not materialize in the short term, there are real uncertainties over the stability of the Sultanate. The fragile health of Sultan Qaboos, who remains the cornerstone of the regime, is raising questions around his succession in background of economic slowdown and public spending cuts that affects Omani households. Moreover, the country is facing an increasingly hostile regional environment and the situation in Yemen presents a direct risk to the Oman’s internal security.