Country Report Oman October 2009

Outlook for 2010-11

• The long-established political structures will remain stable under the rule of the sultan, Qaboos bin Said al-Said, in 2010-11. The greatest political risk is likely to be uncertainty over who will succeed him.
• Oman remains vulnerable to the effects of any future confrontation over Iran's nuclear programme, given both the sultanate's proximity to Iran and the stationing of Western military bases on its territory.
• Economic policy over the forecast period will focus on diversifying the economy away from its reliance on the hydrocarbons sector and on meeting the employment needs of a young and expanding population.
• Oman will not join the planned Gulf Co-operation Council single currency. Instead, it will retain its currency peg to the US dollar.
• The Economist Intelligence Unit forecasts that Oman's real GDP will grow by 3.9% in 2010, driven by steadily rising oil output and higher export volumes. Real GDP growth will accelerate further in 2011, to 4.1%.
• We forecast that average consumer price inflation will drop sharply over the forecast period, to 3% in 2010 and 1.8% in 2011, as oil and non-oil commodity prices decline.
• The current account is expected to remain in surplus over the forecast period, but will narrow in 2011, to the equivalent of 2.2% of GDP, owing to a fall in international oil prices and largely static export revenue.

Monthly review

• The minister responsible for foreign affairs, Youssef bin Alawi bin Abdullah, addressed the UN General Assembly in late September and urged the world powers to step up their efforts to resolve the Israeli-Palestinian dispute.
• In late August and early September, in an effort to boost energy ties with Central Asian states, Oman sent its oil and gas minister to Turkmenistan and received Uzbekistan's foreign economic relations and trade minister.
• The authorities have stepped up efforts to combat swine flu, which has caused at least 21 deaths so far. The spread of the disease, particularly in overcrowded labour camps, has caused considerable concern in Oman.
• Following high import prices in 2008, a special food and water security committee set up by the sultan has called on the UN to conduct a study into how best to resolve Oman's food security problems.
• Fiscal revenue for the first seven months of 2009 has fallen by one-quarter, to OR3.7bn (US$9.6bn), compared with the same period of 2008, owing mostly to lower global oil prices, according to the Ministry of National Economy.