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- GDP (PPP):
- $162.4 billion
- 2.9% growth
- 4.5% 5-year compound annual growth
- $39,681 per capita
- Inflation (CPI):
- FDI Inflow:
Oman’s small, open economy is driven mainly by energy. Tax rates are competitively low, and foreign investment is generally welcome. Recognizing the need for a more broad-based and vibrant private sector, Oman has undertaken regulatory reforms and modernization of its economy.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 67.1 (up 0.4 point)
- Economic Freedom Status: Moderately Free
- Global Ranking: 52nd
- Regional Ranking: 6th in the Middle East/North Africa Region
- Notable Successes: Fiscal Freedom and Trade Freedom
- Concerns: Rule of Law and Regulatory Efficiency
- Overall Score Change Since 2012: –0.8
In early 2011, in response to widespread regional turmoil, Sultan Qabus bin Said 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 is a relatively small oil exporter. The government is trying to expand exports of liquefied natural gas; develop gas-based industries; and encourage foreign investment in petrochemicals, electric power, and telecommunications. It is also trying to replace foreign workers with local staff to reduce chronically high unemployment. Oman joined the World Trade Organization in 2000 and signed a free trade agreement with the United States in 2006.
Several high-profile corruption cases involving government officials and executives from Oman’s oil industry have been prosecuted in recent years. Many influential figures in government still apparently have private business interests that could create potential conflicts of interest. The judiciary is not independent and remains subordinate to the sultan and the Ministry of Justice. Property rights are well protected.
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 less than 3 percent of GDP. Government spending amounts to 45.9 percent of total domestic output in this oil-based economy. A fast-growing population puts pressure on public spending, but public debt remains below 10 percent of GDP.
Oman’s regulatory environment is evolving. Starting a business takes an average of eight days, but the required minimum capital equals over twice the average annual income. Labor laws enforce “Omanization,” a policy that requires private-sector firms to meet quotas for hiring native Omani workers. The IMF has warned that absent cuts in state subsidies on petroleum products and electricity, fiscal deficits would climb above 15 percent of GDP.
Oman’s average tariff rate is 2.5 percent. The government screens foreign investment, and ownership levels in many sectors of the economy are capped. State-owned enterprises operate in the energy and telecommunications sectors. The banking sector continues to evolve, with commercial banks performing well. Most credit is offered at market rates, but the government uses subsidized loans to promote investment.