Oman has faced two great challenges in recent years, only one of which has been within its control.
The first was organizing a smooth succession from Sultan Qaboos bin Said Al-Said, who had been receiving cancer treatment for several years and was looking increasingly frail in his rare public appearances. He died on January 10, after almost 50 years on the throne, having modernized the country beyond recognition and navigating the complex politics of the region with an unusual degree of tact.
His handpicked choice of successor – in a process that was clouded in some mystery and potentially open to dispute – was something of a surprise. Haitham bin Tariq Al-Said was one of three cousins of Qaboos earmarked for the top job, but he was certainly not the front runner. The swift process of anointing him the next ruler was a clear sign the political elite in Muscat wanted to portray a sense of calm continuity, lest any neighbors spot an opportunity to get involved.
Sultan Haitham bin Tariq al-Said at his inauguration ceremony in Muscat, Oman, on Jan. 11, 2020 … [+] (Photo: Xinhua/Yang Yuanyong via Getty Images)
Xinhua News Agency/Getty Images
The appointment of Sultan Haitham also offers a hint at how seriously Qaboos viewed the second major challenge facing the country: it’s fragile, underperforming economy.
Sultan Haitham is fairly well versed in economic matters, having been chairman of the Oman 2040 committee which was set up to formulate a new, more diverse economic path for the country. That experience will be extremely useful in the years ahead.
Oman has far fewer resources to draw on than most of its neighbors. Its foreign exchange reserves and sovereign wealth fund assets are together worth around 50% of GDP, far less than most Gulf neighbours have, according to London-based Capital Economics.
The country has oil and gas reserves, but they don’t provide enough income to cover the government’s large expenditure bill. In essence, Oman has been living beyond its means for many years, running persistently large budget and current account deficits. To finance these, the government keeps on issuing debt. The debt-to-GDP ratio has risen from 5% in 2014 to 60% of GDP now.
To help match its income and spending, Muscat has also looked to its richer neighbors for support, but while it has been able to secure some assistance, it has not been given as much as Bahrain. The likes of Saudi Arabia and the UAE are less supportive because of Muscat’s more independent position on regional matters. Under Sultan Qaboos, Muscat was known for building bridges rather than walls and it failed to support Riyadh and Abu Dhabi’s policies of isolating Iran and Qatar.
Like most Gulf countries, Oman keeps its currency pegged to the U.S. dollar in an effort to provide more economic stability. This makes sense given the chief export, oil, is priced in dollars, but maintaining the exchange rate is not always easy due to the weakness of the economy.
“The new leader faces a difficult task of securing financial support from its neighbors in order to maintain the dollar peg,” says Jason Tuvey, senior emerging markets economist at Capital Economics. “At the very least, fiscal austerity will need to continue and we think that it will be the Gulf’s worst performing economy over the next couple of years.”
Whether the new ruler will be prepared to maintain the level of austerity that economists say is needed remains to be seen, but most observers expect a fairly high degree of policy continuity from the old ruler to the new, at least at first. Haitham’s first public comments as Sultan indicated he would maintain Qaboos’s foreign policy approach too.
The pressure will continue though. Ratings agency Standard & Poor’s says the new Sultan “has a narrowing window to address the country’s fiscal and economic challenges” and has suggested some big policy changes are needed.
“In the absence of substantial fiscal measures to curtail the government deficit, fiscal and external buffers will continue to erode,” the agency warned in a statement issued on January 12. “We anticipate that Sultan Haitham will face a difficult trade-off in the coming months between addressing social concerns, partly arising from weak growth and high youth unemployment, and rising fiscal, external, and funding pressures.”
The Omani authorities have proved wary of putting the population under too much pressure. Intermittent protests over the past decade have generally been met with promises of more spending and job creation, as well as arrests. New taxes have been repeatedly delayed. A value-added tax (VAT) is now due to be introduced in 2021, years later than initially planned, but could easily be postponed once again.
The World Bank has previously warned that “A key risk facing Oman is that the pace of fiscal and structural reforms may slow, hurting investor confidence and prospects for debt sustainability.”
Austerity economics on their own are not really the solution though. Oman needs to diversify its economy away from oil and gas and develop more industries to provide jobs for its young population. Robert Mogielnicki, resident scholar at the Arab Gulf States Institute in Washington, argues there are three key priorities: efficient spending, making quality investments and high-impact reforms.
All three are more easily identified than delivered. When it comes to investing in pursuit of diversification, for example, there is stiff competition from nearby countries in almost every area that Oman could conceivably target, whether that is tourism, logistics, heavy industry or high-tech innovation. But at least a ruler in good health is better able to focus on these issues than one constantly diverted by the need to receive medical care.
Like his predecessor, Sultan Haitham will have a lot of power concentrated in his hands. As well as being Sultan, he will also fill the roles of prime minister, finance minister, foreign minister, defence minister and supreme commander of the armed forces. He may find it politically astute to hand some of these files to others, to craft a broader cabinet and build alliances. But whoever is making the decisions will not find it easy and, ultimately, the responsibility will fall on the Sultan to deliver.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
