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Oman and Yemen Business Forecast Report Q4 2014

  • July 2014
  • -
  • Business Monitor International
  • -
  • 60 pages

Core Views
Oman's economic performance will remain robust over the coming quarters, on the back of healthy growth in oil and gas production and expanding non-hydrocarbon business activity. High public spending and a promising fixed investment picture should further support economic growth in 2014. We forecast real GDP growth of 3.9% in 2014, moderating slightly to 3.7% in 2015. We continue to expect limited inflationary pressures in Oman over the coming quarters, and forecast average consumer price inflation
of 2.1% and 2.8% over 2014 and 2015 respectively, from 1.2% in 2013. Oman's fiscal outlook is becoming increasingly precarious, and we project a budget deficit of 1.2% of GDP in 2014, widening to 5.0% of GDP by 2017. Fiscal reform will need to be accelerated in our view, either through curbs to subsidies and military expenditure, or the establishment of new non-hydrocarbon revenue streams.
Core Views
Y emen's political crisis remains in full swing. Although the national reconciliation conference decided that Yemen will become a federal state, we remain pessimistic about the prospects for political stability over the coming quarters. The economic outlook is uninspiring, with growth remaining sluggish over the 2014-2018 period. Our core scenario sees business activity continuing to be negatively impacted by civil unrest, while persistent attacks on the country's hydrocarbon infrastructure will weigh on exports. The federalist solution will provide different tribal groups with a greater say over policy. Hydrocarbon-revenue sharing will most likely be a central feature in any future state. However key problems of implementation will remain.

Table Of Contents

Oman and Yemen Business Forecast Report Q4 2014
Executive Summary - Oman.... 11
Core Views11
Key Risk To Outlook....11
Chapter 1.1: Political Outlook - Oman... 13
SWOT Analysis.. 13
Domestic Politics .. 14
Corruption Crackdown To Strengthen Business Environment.14
The Omani government's anti-corruption campaign has been extensive by Gulf standards, and will continue in the years ahead.
TABLE: Political Overview..14
Long-Term Political Outlook 15
Royal Succession: Who Is Next In Line?.15
Royal succession is the major question regarding Oman's political future, although demographic change and regional instability also
pose challenges.
Chapter 1.2: Economic Outlook - Oman 19
SWOT Analysis.. 19
Economic Activity.. 20
Strong Domestic Demand To Sustain Growth...20
Oman's economy will continue to grow strongly heading into 2015, driven by elevated domestic demand and expansionary fiscal
policies.
table: economic activity....20
Economic Policy .... 23
Government U-Turn Reduces Odds Of Subsidy Reform..23
The high-profile failure of an attempt by the Omani government to liberalise the system of price controls introduced in 2011 supports
our view that subsidy reform on nationals - a much more challenging task - will not be implemented in the near future.
TABLE: GAS PRICES FOR INDUSTRIAL CONSUMERS....23
Monetary Policy 24
Subdued Inflation Under Rebased Index.24
TABLE: Monetary Policy.24
Banking Sector . 25
Project Financing To Push Growth.25
We see asset growth in the Omani commercial banking sector remaining solid over the coming quarters, on the back of corporate
lending activity driven by project financing.
TABLE: BANKS' NET PROFIT, OMRmn25
TABLE: Commerc ial Banking Sector - A Changing Regulator y Enviro nment.... 26
Chapter 1.3: 10-Year Forecast - Oman.. 29
The Omani Economy To 2023... 29
The Next Episode: Shifting Away From Oil...29
Declining oil production will weigh on growth over the coming decade.
TABLE: Long-Term Macroeconomic Forecasts..29
Chapter 1.4: Business Environment - Oman.. 31
SWOT Analysis.. 31
Business Environment Outlook 32
Institutions.... 32
Oman Q4 2014 .. 32
TABLE: BMI BUSINESS AND OPERATION RISK RATINGS...32
TABLE: BMI LEGAL FRAMEWORK RATING...33
Infrastructure 34
TABLE: LABOUR FORCE QUALITY.34
TABLE: MENA - ANN UAL FDI IN FLOWS...35
Market Orientation.. 36
TABLE: TRADE AND INVESTMENT RATINGS....36
Operational Risk 37
TABLE: TOP EXPORT DESTINATIONS, 2000-2008 37
Executive Summary - Yemen.. 37
Core Views39
Key Risk To Outlook....39
Chapter 2.1: Political Outlook - Yemen. 41
SWOT Analysis.. 41
Domestic Politics .. 42
Risks To Stability To Increase In H214 And 2015....42
We have lowered Yemen's short-term political risk ratings as a result of a deteriorating security situation.
TABLE: Political Overview..42
Long-Term Political Outlook 44
Turbulent Decade Ahead: Scenarios For Change...44
Chapter 2.2: Economic Outlook - Yemen... 49
SWOT Analysis.. 49
Economic Activity.. 50
Sluggish Growth In H214 and 201550
Elevated security risks will weigh on the expansion of the Yemeni economy over the coming years.
TABLE: Economic Activity ...50
Monetary Policy 52
Inflation Remaining Elevated Through 2015.52
TABLE: Monetary Policy.52
Chapter 2.3: 10-Year Forecast - Yemen. 55
The Yemeni Economy To 2023.. 55
Oil And Water: Not Enough Of Either..55
On top of its political troubles, over the next 10 years Yemen must face slowing oil production and the ongoing depletion of its water
resources. Under these circumstances, its economic outlook is far from positive.
TABLE: Long-Term Macroeconomic Forecasts..55
Chapter 2.4: Business Environment - Oman.. 57
SWOT Analysis.. 57
Chapter 3:BMI Global Assumptions.. 59
Global Outlook... 59
Global Recovery Still On Track..59
Table: Global Assumptions....59
Table : Developed States , Real GDP GrowtH , %.60
Table : BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %.. 60
Table : Emerg ing Mar kets , Real GDP Growt h, %61

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