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Oman and Yemen Business Forecast Report Q1 2015

  • October 2014
  • -
  • Business Monitor International
  • -
  • 61 pages

Core Views
Oman's economic performance will remain robust over the coming quarters, on the back of modest gains 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 2015. We forecast real GDP growth of 3.7% in 2015, a slight moderation from our estimate of 3.9% for 2014. 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 1.6% of GDP in 2014, widening to 5.9% of GDP by 2018. 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
We expect the formation of a fragile federalised state in Yemen, and the political situation will remain highly unstable over the coming decade. While not our core view, we flag significant risks of a return to civil war and a de-facto break-up of the state. The economic outlook is uninspiring, with growth remaining sluggish over the 2014-18 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.

Table Of Contents

Oman and Yemen Business Forecast Report Q1 2015
Executive Summary - Oman 11
Middle East - Index League Tables.9
Core Views11
Key Risk To Outlook..11
Chapter 1.1: Political Outlook - Oman.. 13
SWOT Analysis.. 13
Domestic Politics. 14
Yemen's Crisis To Reverberate In Oman..14
Recent developments in Yemen deepen the security challenges confronting Oman and Saudi Arabia, as well as the rest of the Gulf
Cooperation Council (GCC).
TABLE: Political Overview.14
Long-Term Political Outlook. 16
Royal Succession: Who Is Next In Line?..16
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 I. 20
Growth Prospects Remain Strong For 201520
Oman's economy will continue to expand at a robust pace throughout 2015 and we forecast real GDP growth of 3.7%, compared to our
projection of 3.9% for 2014.
TABLE: Economic Activity20
Economic Activity II .. 22
Aluminium Expansion Underlines Broader Industrial Potential..22
While Oman's plans to invest USD35mn to boost aluminium production capacity are small in comparison to the projects pursued by
other GCC states, they support our positive outlook for the country's industrial activities.
Fiscal Policy 24
Able To Withstand Lower Oil Prices For Now.24
Oman's weakening fiscal position presents no immediate threat to the country, and even offers some positives.
table:Fiscal Policy..25
Banking Sector . 27
Conditions Still Favourable To Corporate Lending.27
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. Although Oman is diversifying its economy, it needs to do more to
reduce its energy dependence and develop self-sustaining growth outside of the hydrocarbons and energy-intensive sectors.
TABLE: Long-Term Macroeconomic Forecasts29
Chapter 1.4: Operational Risk - Oman.. 31
SWOT Analysis.. 31
Operational Risk 32
TABLE: Operational Risk..32
Transport Network 33
TABLE: Middle East And North Africa - Transport Network Risks. 33
Economic Openness . 37
TABLE: Middle East and North Africa - Economic Openness Risk. 37
TABLE: Imports By Product..38
Executive Summary - Yemen. 41
Core Views41
Key Risk To Outlook..41
Chapter 2.1: Political Outlook - Yemen 43
SWOT Analysis.. 43
Domestic Politics 44
Political Situation To Deteriorate Further.44
Large-scale political violence will flare-up again in Yemen despite the recent signing of a peace deal between the central government
and northern Houthi rebels.
TABLE: political overview.44
Long-Term Political Outlook. 46
Federalised State To Emerge Amidst Protracted Instability..46
We expect the emergence of a fragile federalised state in Yemen, while the political situation will remain highly unstable over the coming
decade. While not our core view, we flag significant risks of a return to civil war and a de-facto break-up of the state.
Chapter 2.2: Economic Outlook - Yemen 51
SWOT Analysis.. 51
Economic Activity .. 52
Political Instability Weighing On Outlook.52
Elevated security risks and an adverse operational environment in Yemen will lead to real GDP growth of only 2.5% in 2014 and 2.2% in
TABLE: Economic Activity52
Monetary Policy. 54
Inflation To Accelerate In 2015.54
Price pressures in Yemen will accelerate next year as a result of increased political instability and low base effects, and forecast CPI
inflation averaging 8.5% in 2014 and 11.0% in 2015.
TABLE: Monetary Policy..54
Chapter 2.3: 10-Year Forecast - Yemen 57
The Yemeni Economy To 2023. 57
Bleak Outlook As Energy Exports Contract57
Declining oil production, the ongoing depletion of water resources and persistent security risks cloud Yemen's macroeconomic outlook
over the next decade.
TABLE: Long-Term Macroeconomic Forecasts57
Chapter 3: BMI Global Assumptions.. 59
Global Outlook 59
Big Emerging Market Revisions.59
Table: Global Assumptions.59
Table: Developed States, Real GDP GrowtH, %..60
Table: Emerging Markets, Real GDP Growth, %.61

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