Previous Quarterly Editions
Expropriation Risk: 41 40 43 45 ▲Political Violence Risk:35 35 35 35 ►Terrorism Risk:5 5 5 5 ►Exchange Transfer and Trade Sanction Risk: 55 54 54 45 ▼Sovereign Default Risk:37 37 47 47 ►
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*Note: Protest intensity is calculated based on ACLED. Risk levels are calculated by WTW. Where data are missing no risk level will be displayed. For details of calculations, see the introductory essay.
Protest intensity in 2022 and Q1 2023* 2022 Q1 2023Cost of living : Low LowAll protest: Low Low
Cost-of-living protest risk in 2023*Wage protest: LowFood/fuel policy protests: High
Higher energy prices in 2022 provided Oman with a respite after years of mounting budgetary and fiscal pressures caused by lower oil and gas prices after 2014 and the disruptive economic impact of the COVID-19 pandemic. In 2020, the Omani government unveiled a Medium-Term Fiscal Plan with measures to raise non-oil revenues and address troubling indicators such as a surge in government debt as a proportion of GDP from 4.9% in 2014 to more than 80% in 2020, and an increase in the fiscal deficit from 7.1% to 18.3% in
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Oman is improving its business environment for domestic and foreign investors. In March 2022, the Muscat Stock Exchange announced it was allowing 100% of foreign ownership in joint stock companies in Oman. This is intended to revive the local exchange, increasing its liquidity and strength, but also to signal a greater openness to foreign capital in general.
The exchange also revealed Oman aims to list 35 state-owned enterprises in the next five years and plans to take one or two oil companies public. Oman, like its Gulf peers, is looking to capitalize on high energy prices to list upstream and downstream assets in the energy sector. In March 2023, OQ, the state energy firm, raised USD244 million from a 49% share sale in its drilling unit, Abraj Energy. Oman intends to use the cash to finance development spending in the non-oil economy (port infrastructure and tourism) and to move up the hydrocarbons value chain (petrochemicals).
More asset sales are expected, including the OQ Gas Network of pipelines. Moves towards privatization (including public-private partnerships) and encouraging foreign investment suggest expropriation risks will be very low in coming years. Even so, the entrenched economic interests of politically well-connected merchant families mean market access will be challenging.
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In past years, Oman has seen bouts of popular anger on the streets, fuelled mainly by rising unemployment and perceptions of official corruption. There have also been popular calls for jobs, higher salaries, reduction in the government’s media control, and for reduced numbers of foreign workers, to help Omanis find private sector jobs. The late Sultan Qaboos raised the minimum wage and expanded the social safety net, among other responsive measures.
Under Sultan Haitham, there has been societal pushback against public sector austerity and tax measures, and their wider economic effects, as demonstrated by the unemployment protests in May 2021. Pushback is also likely against the phasing out of electricity and energy subsidies.
The current high oil price environment – partly a consequence of the disruption of the Russia/Ukraine crisis – will generate fiscal surpluses that will increase pressure on the Sultan to extend government largesse to Oman’s unemployed. Public sector hiring will also likely accelerate, in an effort to appease Omanis, and plans announced in 2020 for the first income tax on high earners in any Gulf State, initially expected for 2022, have been put on hold.
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Oman has no terrorism; policing and security provisions are effective. This situation is unlikely to change in coming years, although signing a peace treaty with Israel – which is a hypothetical – could open the way for radical groups to target government and Western assets.
Oman has adequate buffers to finance goods imports and maintain the currency’s peg to the U.S. dollar. Reserves usually hover around the equivalent of six to seven months of imports. The stability of the reserves is sensitive to oil prices and is therefore rising with the current strength of oil market conditions.
Higher oil prices would help bolster reserves, but Oman will also need strong foreign investment inflows to pre-empt foreign exchange pressures that would arise from a future oil price downturn – something that could happen if new oil exporters enter the market and when the Russia-Ukraine war is eventually resolved.
In August 2022, Fitch upgraded Oman’s credit rating by one notch. Prior to the upgrade, the agency had downgraded Oman four times since initiating its coverage in 2017. Standard and Poor’s followed suit with an upgrade in November 2022, while Moody’s changed its credit outlook from ‘stable’ to ‘positive’. These reflected Oman’s fiscal strength, with oil prices then trading at above Oman’s fiscal break-even price of around USD80 per barrel, although prices have fallen below their break-even level in 2023.
Oman has said it will use the windfall to step up repayments of its external debt, which will further reduce default risk. The country has also emerged in the Gulf as a reform stand-out, staying the course in a fiscal balance programme, lowering its debt, and introducing a value-added tax in 2021. A fiscal surplus of USD3 billion in 2022 reversed nearly a decade of budget deficits, giving Oman the fiscal space to strengthen its foreign currency reserves, although a deficit of USD3.4 billion is projected for 2023.
2019-20 alone. The higher-than-expected energy revenues in 2022 removed some of the urgency from the Fiscal Plan, which had already shown signs of generating political backlash from sections of Omani society.
Several days of countrywide protests in May 2021 reflected public discontent at high levels of unemployment but also featured calls to abolish the value-added tax which had come into force the previous month. While the demonstrations were quickly defused, they provided an indication of the sensitivity of austerity measures introduced by Sultan Haitham after he succeeded his cousin, Sultan Qaboos, in January 2020. Far lower levels of resource wealth, compared with other Gulf States, meant the
Omani government was more vulnerable to economic downturns and Omani citizens more affected by inflation, cost-of-living rises, and cuts to public subsidies.
The Omani authorities responded to the rise in oil and gas prices in 2022 by putting on hold plans announced as part of the Medium-Term Fiscal Plan for an income tax on high earners initially set to come into force in 2022, later pushed back to 2023. In his first major address as Sultan, in February 2020, Haitham stressed the importance of ‘citizens partnership’ while senior officials have talked publicly of the need to redesign aspects of personal taxation and social security. However, the blowback from the 2021 protests injected notes of caution into advocates of further reform,
and the 2022 rise in energy revenues provided relief from the authorities’ perspective.
Omanis go to the polls in October 2023 to elect the 85 representatives of the Consultative Assembly. In the absence of political parties or ideologically based campaigns, socioeconomic issues become one of the few issues of public policy deemed permissible for debate. If oil and gas prices continue to weaken over the summer, the transitory relief from budgetary and fiscal pressures may require the authorities to consider new austerity measures, which they may delay announcing until after the vote, the date of which is still to be determined.
Memories remain fresh not only of the 2021 protests but of widespread demonstrations against perceived high levels of economic corruption which erupted in Omani cities in February and March 2011 at the height of the ‘Arab Spring’ elsewhere.