Outlook for 2011-12

• The protests that started in Oman in late February are unlikely to die down unless the sultan, Qaboos bin Said al-Said, takes concrete steps to address corruption and unemployment and bring in genuine political reform.
• In spite of anti-government protests, the sultan retains genuine popular support. It is unlikely that the protests, which target ministers and powerful businessmen, will yield the same results as those in Tunisia and Egypt.
• The country remains vulnerable to the effects of any future confrontation over Iran's nuclear programme, given both the sultanate's proximity to Iran and the stationing of Western military bases on its territory.
• The government will increase public spending in an effort to appease the protesters. Economic policy over the forecast period will focus on meeting the employment needs of a young and fast-expanding population.
• We have revised up our 2010 growth estimate to 4.5% of GDP as oil production increased substantially. Real GDP growth will accelerate further over the forecast period, to an average of 4.9%, owing to high oil prices.
• We forecast that average consumer price inflation will increase to 4.1% in 2011 as food prices rise, but will fall to 3.9% in 2012 as prices stabilise.
• The current account is expected to record surpluses in 2011-12, driven by higher oil prices, but production growth will be modest. We forecast an average surplus of 3.1% of GDP in 2011-12, down from 3.6% of GDP in 2010.

Monthly review

• The wave of protests that has spread to the Middle East since mid-December broke over Oman in late February. Official sources report one death, but other reports have put the death toll at six people.
• The protests, which began with peaceful demonstrations in the capital, Muscat, have turned violent in Sohar, with a police station and government vehicles being burnt.
• The major cabinet reshuffle implemented in early March has been welcomed by the protesters. A ministerial committee has also been formed to look at widening the powers of the consultative council.
• Plans for Oman's third oil refinery, to be built at Duqm, are close to being approved. Talks, which began in 2006, were postponed in November 2008 owing to the global economic crisis.
• Petroleum Development Oman, the largest oil producer in the country, reported average output for 2010 of 553,000 barrels/day, marginally higher than in the previous year.