Boston, MA -- (SBWIRE) -- 08/16/2012 -- Core Views Government spending will be the primary driver of Oman's growth momentum over the medium term. With oil prices set to remain high throughout the year, and room in the government's budget for a further ramping up of social spending, we expect the economy to continue growing robustly in the near term. There are few risks clouding Oman's political outlook in 2012. Protest activity throughout the country has eased off considerably, and high oil prices leave the government with room to increase social spending in the event that social tensions re-emerge. While our view on the external political environment is less sanguine, in general we regard the risks stemming from these conflicts as minimal. Major Forecast Changes We have made minor downward revisions to our real GDP projections on the back of our expectation that oil production in the coming years will slow more quickly than we had previously forecast. We now forecast GDP growth of 4.8% and 3.8% in 2012 and 2013 respectively, down from our previous forecasts of 5.4% and 4.0%. The first anniversary of the emergence of the protest movement, which occurred in February, further demonstrates the lack of popular dissatisfaction with the government. The anniversary - which had been cited by some in the local media as a test of the government's popularity - passed off without major incident, and we have raised our short-term political risk rating from 79.6 to 81.3 out of 100. Key Risks To Outlook We stress that, for the foreseeable future, Oman's economy will remain highly reliant on oil revenue. Should prices record a more pronounced drop before the economy has been sufficiently diversified away from the energy sector, our positive outlook 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 away from the market.
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