Business Monitor International


Oman and Yemen Country Risk Report

Published 28 January 2015 | Quarterly

  • 62 pages
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$1,195.00
Oman and Yemen Country Risk Report

Core Views

  • Uncertainty over the health of Sultan Qaboos bin Said al-Said, who has governed Oman since 1970, is bringing the succession question to the fore. We see major risks in the succession process. Governance is set to become more unpredictable in the future, and the Omani political system - with the Sultan enjoying all-encompassing powers - is largely unsustainable in its current form.

  • The decline in oil prices will have a more severe impact on government and private consumption in Oman than in the rest of the GCC, given the country's fiscal vulnerabilities. We forecast the Omani economy to grow by 3.2% in real terms in 2015, down from an average rate of 3.5% between 2009 and 2012.

  • The fall in oil prices will leave Oman posting budget and current account deficits from 2015 onward. While the country can rely on the debt and loan markets for the time being, the need to implement new taxes and curb spending will test the regime's popularity.

  • We see Omani consumer price inflation rising slightly over the coming quarters, to an average of 1.8% in 2015 from 1.0% in 2014. A recovery in global food prices and higher energy prices for some industries will fuel inflationary pressures, but this will be mitigated by the continuing appreciation of the US dollar.

Key Risks To Outlook

  • We stress that, for the foreseeable future, Oman's economy will remain highly reliant on oil revenue. Our core view sees the government's public investment programme remaining relatively unaffected by the recent fall in oil prices. However, in the event of more extensive disruptions to capital expenditure, our positive outlook on the economy might prove overly optimistic.

  • The autocratic nature of the political regime in Oman (and elsewhere in the Gulf) will ensure that risks of an uptick in protest activity by pro-democracy demonstrators remain elevated; such activity would generate uncertainty and deter investors from the market.

  • Oman is well positioned to benefit from...

Table of Contents

Executive Summary - Oman
11
Core Views
11
Key Risk To Outlook
11
Chapter 1
13
SWOT Analysis
13
Domestic Politics
14
After Qaboos: Risks To Political Stability
14
Uncertainty over the health of Sultan Qaboos bin Said al-Said, who has governed Oman since 1970, is bringing the succession question
Uncertainty over the health of Sultan Qaboos bin Said al-Said, who has governed Oman since 1970, is bringing the succession question
to the fore
TABLE: Political Overview
14
TABLE: FRONTRUNNERS FOR THE SUCCESSION
15
Long-Term Political Outlook
16
Royal Succession: Who Is Next In Line-
16
Royal succession is the major question concerning Oman's political future, although demographic change and regional instability also
Royal succession is the major question concerning Oman's political future, although demographic change and regional instability also
pose challenges
The impetus for any major political change is likely to come from Sultan Qaboos bin Said al-Said, assuming that he
tackles the issue before the end of his reign
Chapter 1
19
SWOT Analysis
19
Economic Activity
20
Economy To Feel Impact Of Weaker Oil
20
The decline in oil prices will have a more severe impact on government and private consumption in Oman than in the rest of the GCC,
The decline in oil prices will have a more severe impact on government and private consumption in Oman than in the rest of the GCC,
given the country's fiscal vulnerabilities
2% in real terms in 2015, down from an average
rate of 3
TABLE: Economic Activity
20
TABLE: SELECTED INFRASTRUCTURE AND INDUSTRIAL PROJECTS
21
Fiscal Policy
22
Fiscal Reform Moving To The Fore
22
The fall in oil prices will leave Oman posting budget and current account deficits from 2015 onward
While the country can rely on the
debt and loan markets for the time being, the need to implement new taxes and curb spending will test the regime's popularity
TABLE: Fiscal Policy
23
Monetary Policy
24
Moderate Uptick In Inflation
24
We see Omani consumer price inflation rising slightly over the coming quarters to an average of 1
0% over
2014
TABLE: Monetary Policy
25
Chapter 1
27
The Omani Economy To 2024
27
The Next Episode: Shifting Away From Oil
27
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 Forecasts
27
Chapter 1
29
SWOT Analysis
29
Operational Risk
30
TABLE: Operational Risk
30
Availability Of Labour
31
TABLE: MENA - Availability Of Labour Risk
32
TABLE: Countries Of Origin Of Migrant Workers
33
Crime Risk
35
TABLE: Middle East And North Africa - Crime Risks
35
TABLE: Crime Statistics
36
Executive Summary - Yemen
39
Core Views
39
Key Risk To Outlook
39
Chapter 2
41
SWOT Analysis
41
Domestic Politics
42
Extremely Fragile Political Situation In 2015
42
The political situation in Yemen will remain extremely fragile in 2015
A highly unstable semi-federalised state will likely emerge over the
next few years, with the local branch of al-Qaeda becoming increasingly active
TABLE: Political Overview
42
Long-Term Political Outlook
44
Federalised State To Emerge Amidst Protracted Instability
44
We expect the emergence of a fragile federalised state in Yemen, while the political situation will remain highly unstable over the coming
We expect the emergence of a fragile federalised state in Yemen, while the political situation will remain highly unstable over the coming
decade
Chapter 2
49
SWOT Analysis
49
Economic Activity
50
Weak Growth Over The Next Five Years
50
Economic growth will remain slow in Yemen in 2015 owing to elevated security risks and an adverse operational environment
We
forecast real GDP growth of 2
Growth will be sluggish over the next
five years, and foreign investment will be minimal
TABLE: Economic Activity
50
Monetary Policy
52
Inflation Accelerating As Political Situation Deteriorates
52
Inflation in Yemen will increase in 2015, as elevated political instability results in disruptions to supply chains and agricultural production
We forecast CPI inflation averaging 12
TABLE: Monetary Policy
53
Chapter 2
55
The Yemeni Economy To 2024
55
Bleak Outlook As Energy Exports Contract
55
Declining oil production, the ongoing depletion of water resources and persistent security risks cloud Yemen's macroeconomic outlook
Declining oil production, the ongoing depletion of water resources and persistent security risks cloud Yemen's macroeconomic outlook
over the 2015-2024 period
TABLE: Long-Term Macroeconomic Forecasts
55
Chapter 3: BMI Global Assumptions
57
Global Outlook
57
New Era For Oil
57
Table: Global Assumptions
57
Table: Developed States, Real GDP GrowtH, %
58
Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
58
Table: Emerging Markets, Real GDP Growth, %
59

The Oman and Yemen Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Oman and Yemen and is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market..

An influential new analysis of Oman and Yemen's economic, political and financial prospects through end-2017, just published by award-winning forecasters, Business Monitor International (BMI).

Key Uses

  • Forecast the pace and stability of Oman and Yemen's economic and industry growth through end-2017.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the business environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Oman and Yemen's country risks against regional peers using BMI's country comparative Risk Ratings system.
  • Evaluate external threats to doing business in Oman and Yemen, including currency volatility, the commodity price boom and protectionist policies.

The Oman and Yemen Country Risk Report by Business Monitor International (BMI) includes three major sections: Economic Outlook, Political Outlook and Business Environment.

Economic Outlook:

How will the Omanese and Yemenis economic policy-making and performance impact on corporate profitability over 2013-2017?

BMI provides our fully independent 5-year forecasts for Oman and Yemen through end-2017 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Oman and Yemen Country Risk Report features BMI's forecasts with supporting analysis for 2013 through to end-2017, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Ratings system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector exposure).
  • Global Assumptions - forecasts for each year to end-2017 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Oman and Yemen and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Oman and Yemen, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Oman and Yemen over the next 5-years?

BMI's Oman and Yemen country Risk Ratings evaluate the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Omanese and Yemenis Market - Political Strengths, Weaknesses, Opportunities and Threats facing Oman and Yemen.
  • Political Stability and Risk Assessment - BMI's Risk Ratings assess explicit short- and long-term risks to political stability; latest ratings, rankings and trends for Oman and Yemen's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.

Key Benefits

  • Benchmark Oman and Yemen's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Business Environment

Business Environment Risk Ratings with SWOT Analysis - Business environment Risk Ratings for Oman and Yemen, benchmarked against ratings for regional neighbours.

Country Competitiveness - Competitiveness of Oman and Yemen's business operating environment in supporting corporate growth and profitability, compared with regional neighbours.

Business Environment Contents

  • Domestic Environment - Transparency, cronyism and corruption; labour market flexibility; corporate tax burden; interest rate levels; sophistication of banking sector and stock market; levels of business confidence; infrastructure and IT.
  • Foreign Direct Investment - Analysis of foreign investment regime; foreign ownership laws; attractiveness of business environment to foreign investors.
  • Foreign Trade - Analysis of trading environment, government trade policy, liberalisation measures, tariffs and membership of trade areas.

Key Benefits

  • Assess your company's evolving exposure to country specific operational and business risks, using BMI's in-depth analysis of the legal and regulatory business environment.
  • Understand your market's comparative strengths and weaknesses in the key areas of commercial infrastructure and business institutions, using BMI's proprietary global Business Environment Risk Ratings.

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Testimonials

The sections that I find most interesting and useful are the macroeconomic data and forecasts for the country, top export destinations and economic activity. The indicators/analysis of these areas helps us orient our thinking, our assumptions and, consequently, our decisions in the commercial area.

Country Manager, DHL Express