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- GDP (PPP):
- $171.4 billion
- 4.1% growth
- 4.3% 5-year compound annual growth
- $44,628 per capita
- Inflation (CPI):
- FDI Inflow:
The government of Oman has tried to expand exports of liquefied natural gas and encourage foreign investment in petrochemicals, electric power, and telecommunications. It hopes to mitigate its dependence on declining oil resources through diversification that would reduce the oil sector’s share from about 45 percent of GDP to 9 percent by 2020.
Greater structural reform is still needed to improve the business environment. Bureaucracy and cumbersome regulations hinder entrepreneurial activity, and state-owned enterprises distort the economy. The judiciary is not independent. Social welfare spending has strained the budget, and fiscal prudence will be needed as the population grows and government spending on welfare programs mounts.
Oman, a relatively small oil-producing kingdom with one of the Arab world’s smallest populations, has been ruled by Sultan Qaboos bin Said Al-Said since 1970. In early 2011, in response to widespread regional turmoil, the sultan changed cabinet ministers and promised political and economic reforms. A Consultative Council elected in October 2011 expanded regulatory and legislative powers. As part of the government’s efforts to decentralize authority and allow greater citizen participation in local governance, Oman conducted its first municipal council elections in December 2012. Oman joined the World Trade Organization in 2000 and signed a free trade agreement with the United States in 2006.
Property rights are well protected. The judiciary remains subordinate to the sultan and the Ministry of Justice, but authorities generally hold security personnel and other officials accountable for their actions. Several high-profile corruption cases involving government officials and executives of the state-owned oil company have been prosecuted in recent years, but many influential government officials are believed to have business-related conflicts of interest.
There is no individual income tax, and the top corporate tax rate is 12 percent. There is no consumption tax or value-added tax. The overall tax burden equals 2.6 percent of total domestic income. Government spending has amounted to 51.5 percent of total output (GDP) over the past three years, and budget deficits have averaged 6.3 percent of GDP. Public debt is equivalent to 20.6 percent of GDP.
Although improving, the overall freedom to conduct a business remains limited by the inefficient regulatory environment. The nonsalary cost of employing a worker is low, but the labor laws enforce the “Omanization” policy that requires private-sector firms to meet quotas for hiring native Omani workers. Cuts in government subsidies for petroleum products have led to rises in fuel prices; other subsidies remain in place.
Trade is extremely important to Oman’s economy; the value of exports and imports taken together equals 115 percent of GDP. The average applied tariff rate is 2.4 percent. There is no general screening of foreign investment. State-owned enterprises distort the economy. Most credit is offered at market rates, but the government uses subsidized loans to promote investment. The Muscat Securities Market is active and open to foreign investors.