There is increasing concern about the health of Sultan Qaboos who has ruled Oman for 44 years and overseen its transformation from impoverished backwater riven by internal conflicts to a peaceful, modern and fairly rich state. There is a fear that his death could result in a power struggle which in turn could generate renewed social unrest, last seen in 2011. But with economic conditions worsening and the oil price falling, the country needs decisive action to further diversify the economy and implement potentially politically sensitive spending cuts. We expect GDP growth to slow to 3.6% this year and 2.7% in 2015, from 5.0% last year, due not least to slower growth in hydrocarbon sector output and the impact on the non-oil economy of outright cuts in public spending. Despite the latter, however, the budget balance is likely to swing into major deficit next year thanks to a huge drop in oil revenues. For similar reasons, the current account balance will record a deficit – only its second in fifteen years.