Executive summary - Oman

28 Sep 2023 - Country Risk | Profile

Our take
Oman is politically stable. Sultan Haitham bin Tariq’s rule is secure, with little internal opposition from the
populace or the royal family. Haitham reduced the prospect of political uncertainty or family infighting by
formalizing his line of succession in 2020, establishing the position of heir and appointing his eldest son heir-
apparent.
High oil prices since 2022 have benefitted Oman’s fiscal and current-account balances with the first surpluses
in years, although these will fall near zero in 2023–24. The oil revenue windfall enabled the government to pay
down its debt, which fell to 40% of GDP in 2022 from 61% in 2021, and should remain broadly stable in the
near term. Real GDP expanded 4.3% in 2022, but should moderate to about 1.5% in 2023–24 on lower oil
production. Consumer price inflation is expected to be the second-lowest in the world in 2023 and 2024,
averaging 1.0% and 0.9%, following a 10-year high of 2.8% last year.
Oman’s "medium-term fiscal plan" aims to reduce fiscal spending and increase revenues. However, the
government’s ability to reduce its public-sector wage bill is constrained by a large public-sector workforce
comprising mostly Omanis (89%) and by high youth unemployment, whereas 79% of private-sector jobs are
occupied by the large expatriate community (42% of population). Moreover, the government has delayed
subsidy-removal plans to minimize energy-price inflation. A personal income tax on high earners is unlikely in
2023, although the government implemented a 5% value-added tax (VAT) in 2021. As government revenue and
spending remain high, there is less risk of a resumption of the protests held in 2021 in Sohar, Rustaq, Niswa,
and Sur over economic demands. Protests are not, however, aimed at challenging the sultan’s position.
Oman remains dependent on hydrocarbons, which provide 77% of fiscal revenue, 65% of goods exports, and
one-third of GDP, despite recent investment and sectoral diversification. New hydrocarbon discoveries
indicate increased production in the short term, yet with increasingly expensive extraction methods, oil
production will begin a longer-term decline during the current decade, keeping economic diversification a
primary policy goal. Priority sectors for expansion include construction, food production, agriculture and
fisheries, chemicals and plastics, and logistics. Port infrastructure such as that of Duqm also will remain a
focus within the government’s diversification plans.
Urban areas, strategic infrastructure, or marine assets are unlikely to be directly targeted by Iran or its allies
other than during a broader regional Iran-US armed conflict. If this occurred, the risks of Iranian missile
strikes on Omani airbases and facilities assessed by Iran as being used by US forces would increase to high.
Such incidents are unlikely while nuclear talks, and reducing rivalries between Saudi Arabia and Iran, continue.

Risk scores

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© S&P Global. 2023

 Country Risk Scores

Date of
Risk Value Outlook Trend last
change

1.9
Strategic Risk
Elevated

Political 1.7 Elevated → 22 Jun 2022

Economic 1.7 Elevated → 04 May 2023

Legal 1.8 Elevated → 16 Dec 2022

Tax 2.5 High → 26 Jan 2023

Operational 2.2 Elevated → 26 Jan 2023

Security 1.3 Moderate → 16 Dec 2022

Note: 0.1 = minimum risk; 10.0 = maximum risk

Default Risk Scores

Medium Term Overall

Score / 100 50 Ongoing Uncertainty
Note: 0 = minimum risk; 100 = maximum risk
Scores form part of enhanced Country Default Risk Service.

Source: S&P Global Market Intelligence © S&P Global

Political
© S&P Global. 2023 Page 2 of 6
 Sultan Haitham bin Tariq al-Said has been in power since January 2020 and his rule is unlikely to face open opposition
from within the royal family after a reshuffle in August 2020. In January 2021, he formalized the Omani line of
succession, appointing his eldest son Dhi Yazan as heir-apparent. This consolidates state stability and supports policy
continuity, including Oman's policy of balanced relations with the United States, Iran, and other Gulf Cooperation
Council members.

Political Data

Political summary
Presidential elections Next contest: N/AP; Last contest: N/AP
Legislative elections Next contest: October 2023; Last contest: 27 October 2019. Appointments for the Council of State
were announced on 7 November 2019. The next elections are due in October 2023.
Head of State Haitham Bin Tariq Al-Said (since 11 January 2020)
Crown Prince; Minister of Culture, Sports and Youth Sayyid Theyazin Bin Haitham Bin Tariq Al-Said (since 12 January 2021)
Deputy Prime Minister Sayyid Shihab Bin Tariq Bin Taimour Al-Said (since 2 March 2017)
Deputy Prime Minister Sayyid Fahd Bin Mahmoud Al-Said (since 23 June 1970)
Finance Sultan Ibn Salim Bin Said Al-Habsi (since 26 August 2020)
Foreign Affairs Sayyid Badr Bin Hamad Bin Hamoud Al-Busaidi (since 26 August 2020)

Economy Said Bin Mohammed Bin Ahmed Al-Saqri (since 26 August 2020)
Justice/Attorney General Abdullah Bin Mohammed Bin Said Al-Sa'Eedi (since 26 August 2020)

Source: CIRCA People in Power © 2023 S&P Global

Economic
Forecast summary
Real GDP growth will likely slow to 1.5% in 2023–24, from 4.3% in 2022. Oil output will likely contract by
2.0% in 2023 and grow 0.4% in 2024, while non-oil GDP expands 3.0% and 2.0%, respectively.
Consumer price inflation should be one the lowest in the world at 0.8% in 2023–24, given subsidized energy,
lower food prices, higher interest rates and weaker growth. This follows a 10-year high of 2.8% in 2022.
Oman should maintain small fiscal surpluses averaging 0.4% of GDP in 2023–24, contingent on expenditure
restraint; otherwise, deficits could ensue. This follows 2.6% of GDP in 2022, Oman’s first surplus in years
given higher oil revenue.
Government debt dropped to 40% of GDP in 2022 from 61% in 2021 as the government used part of its
windfall to repay debt. The debt-to-GDP ratio should remain broadly similar in 2023–24.

Changes since last forecast

© S&P Global. 2023 Page 3 of 6
 September 2023 forecast
2023 2024
Current Prior Current Prior Rationale
Real GDP 1.5 1.5 1.5 1.5 There is no change in the growth outlook.
(Percent change)
Industrial production -2.0 -2.0 0.4 0.4 There is no change in the outlook for industrial
(Percent change, annual average) production, which for Oman is proxied by oil
production.
Consumer price inflation 0.8 0.8 0.8 0.8 There is no change in the inflation outlook as
(Percent change, annual average) there was no new data as of the forecast update.

Source: S&P Global Market Intelligence. © 2023 S&P Global

Data and forecasts

Oman: Key indicators and forecasts

Historical
data edge 2021 2022 2023 2024 2025 2026 2027
Real GDP (% change) 2022 3.1 4.3 1.5 1.5 1.0 1.4 1.4
Nominal GDP ($ billion) 2022 88.2 114.7 105.7 108.3 109.9 113.3 116.5
Nominal per-capita GDP ($) 2021 19,509 25,057 22,754 22,983 22,981 23,386 23,728
Consumer price index (% change) 2022 1.5 2.8 0.8 0.8 1.0 1.2 1.1
Exchange rate (year end, per $) 2022 0.38 0.38 0.38 0.38 0.38 0.38 0.38

Data compiled Sep. 15, 2023.

Source: S&P Global Market Intelligence. © 2023 S&P Global

Business environment
Strengths and weaknesses
Strengths
The judiciary is not subject to political interference; an environment supportive
of litigation is developing.
The government is unlikely to amend or cancel contracts without extensive
negotiations and mutual agreement with foreign investors.
Fast-track government licenses and permits are likely to be made available for
large-scale foreign investors partnering with the government.
Attractive incentives are given for new investments, subject to government
approval, in addition to tax advantages.
Weaknesses
Omani businesses are likely to be favored over foreign competitors that lack a
local partner, but are likely to face income tax from 2022.
Lengthy bureaucratic procedures, which are often badly documented, as well as
regulatory obstacles, persist.
Investors will probably face increased emphasis by the state on adhering to
local content requirements.
Corruption is not a major obstacle for businesses, yet is considered a growing
problem in the public sector.

© S&P Global. 2023 Page 4 of 6

 Legal
Business contracts are mostly enforced and the legal system is largely fair, but legal procedures are lengthy. Oman's
Basic Law considers the agreements and treaties between Oman and other countries or international institutions to be
the highest form of written law; all agreements and treaties must be ratified. A royal decree separating the executive
from the Supreme Judicial Council (SJC) was issued in March 2012. The sultan chairs this council and must ratify
decisions taken in his absence. Omani law recognizes foreign arbitration awards and is a signatory to the New York
Convention and the International Convention for the Settlement of Investment Disputes.

Tax
Oman is planning on introducing personal income tax in 2023 on high earners, likely to tackle its growing budget deficit
and government debt. Personal income tax would likely be around 5% on income over US$100,000. Taxation is
uniformly applied irrespective of foreign participation in a commercial venture. Corporate taxes were raised to 15% in
February 2017, from a flat rate of 12%, with a small risk of further increases in 2021 following the widening fiscal
deficit. Oman introduced a 5% value-added tax (VAT) in April 2021.

Operational
Approximately 77% of government revenues are derived from hydrocarbon sales, and rising petrodollar inflows due to
Russia’s invasion of Ukraine will benefit economic activity momentum and real GDP growth. Nonetheless, Oman is
likely to proceed with its economic diversification as part of the Oman Vision 2040. This includes preparing state assets
in energy, manufacturing, tourism, and logistics for public offerings to empower the private sector and generate
revenues. Foreign investors have to contend with an emphasis on local-content requirements. Bribery is prevalent in the
public sector, including facilitation payments and petty bribery in front-line services.

Security
War risks
Oman's key challenge is balancing its relationship with its Western allies, Iran, and other Gulf Cooperation Council
(GCC) member states. Oman's mediatory capacity between Iran and the United States, alongside its refusal to
participate in the Saudi-led military intervention in Yemen, reduces the risk of direct military retaliation against Oman in
the event of conflict involving the US, Iran, and/or the Gulf states, or in the event of unintended escalation following
minor naval incidents between the US or other Gulf states and Iran in the Sea of Oman or near the Strait of Hormuz.

© S&P Global. 2023 Page 5 of 6

 Terrorism risks
Despite relatively robust security measures along the Omani-Yemeni border, the conflict in Yemen, where Islamist
militants enjoy relative freedom of movement, entails a moderate risk of successful infiltration by militants capable of
transferring IED capability to Oman; nevertheless, Saudi Arabia and the UAE are likely to remain much higher priorities
for militants. Private and commercial shipping are at growing risk from Somali pirates in the Arabian Sea off the Omani
coast and near the Gulf of Aden, but this is unlikely to be overtly motivated by terrorism.

Social stability and unrest risks

Strikes and collective bargaining are becoming more common in companies that employ a large proportion of Omanis.
Strikes can last for weeks if no settlement is reached. Sustained policies to reduce state utility subsidies from 2021 are
likely to increase the risk of worker protests. The government plans to introduce personal income tax for high earners
with proceeds going to social programs, likely to counteract unrest.

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