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Oman Insurance Report Q2 2009Published by: Business Monitor International Published: May. 21, 2009 - 74 Pages Table of Contents
AbstractThough Oman’s financial sector is relatively insulated from global problems, the oil and gas sector’sreliance on commercial finance will undermine some of the country’s major economic projects.Economic activity will be hit by the tail-wind of the global financial crisis.Like other GCC states, Oman is looking largely to spend its way out of recession, unveiling anexpansionary budget for 2009 which will see cuts in public expenditure only if oil prices dropsignificantly below US$45 per barrel (bbl). The government unveiled a US$16.6bn spending programmefor 2009, which represents an 11% increase over 2008, and would lead to a projected deficit of 5% ofGDP, at about OMR810mn. Oman’s central bank has shoehorned additional dollar liquidity into thebanking system, deploying monetary tools - cutting interest rates and temporarily raising the permittedloans-to-deposit ratio. However, this fiscal stimulus is not going to rescue the Oman economy by itself;and, with oil-sector activity likely to rise by only 1.0%, we envisage a 0.5% contraction in real GDP thisyear, though growth should return to 2.5% in 2010 on the back of stronger non-hydrocarbonsperformance (where there has been some relatively good news to report in recent months). Fortuitously, the government has a backlog of financial assets to enable it to ramp up expenditure on keyeconomic projects. The government’s gross financial assets plus the central bank’s foreign exchangereserves amounted to around 75% of GDP at end-2008, according to Moody’s estimates. Overall debtlevels remain comparatively small. We predict a substantial decline in inflation this year, after a bad 2008. Official figures show inflationaveraged 12.4% year-on-year (y-o-y), slightly above BMI’s 11.8% forecast for last year. Despite theobviously inflationary side-effects of increased public expenditure, we see the liquidity measuresundertaken by the monetary authorities last year and the drastic slide in consumption levels ensuring areduction in annual inflation to just 6.0% y-o-y in 2009, falling further to 4.0% y-o-y in 2010. Much ofthe increase in inflation last year was related to the H1 hike in food prices, which saw the cost of cookingoil increase by 60% and cereal rise by 42.3%. Rents rose by 15% last year due to the supply bottlenecks,but this should be eased this year as demand falls back. Developers report that the price of land inMuscat’s suburbs has fallen by 65% on the previous year’s levels. The other problem was that the surgein prices took place against the backdrop of a weak greenback, which exacerbated inflationary pressures.This issue no longer pertains, and declining inflation is one positive side effect of the global financialcrisis for the Oman authorities. In the Middle East and North Africa, we profile 17 companies. These are AGF, AIG, Allianz, Aviva,AXA, Cardif, ERGO, Eureko, Fortis, Generali, Groupama, HSBC Insurance, Liberty Mutual,MAPFRE, RSA, UNIQA and Zurich Financial Services. Over the course of 2008, actual/estimated total premiums in Oman rose by 8% to OMR238mn.Non-life premiums rose by 11% to OMR219mn while life premiums dropped by -17% to OMR19mn.Between now and the end of the forecast period, we expect that annual non-life premiums will grow byOMR137mn while annual life premiums should grow by OMR41mn. Growth in non-life premiums should be driven by the general growth of nominal GDP plus a rise in nonlifepenetration from the current level of 1.13% to 1.30%. Growth in Life premiums should be driven by the change in the overall population and a rise in lifedensity from US$11.94 to US$40.00 per capita. BMI’s Insurance Business Environment Rating for Oman is 49. Get Full Details About This Report >> |
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