Wednesday 15 / January / 2025
Muscat: Oman is expected to further improve its credit ratings and outlook through the implementation of its fiscal consolidation plan under the leadership of His Majesty Sultan Haitham bin Tarik. Higher oil prices in the world market further consolidated the gains and brought windfalls for the economy.
Top credit ratings agencies had upgraded Oman’s credit rating in 2022 and revised their outlook upward as a result of fiscal consolidation and prudent measures taken by the government.
Despite the current high oil price environment, the rating agencies however, warn of an economic crisis which will lead to a reversal in the high oil price environment, causing an adverse impact on financial and economic stability, the Ministry of Finance (MoF) said in its Guide to State’s General Budget for Fiscal Year 2023 document.
“Therefore, all credit ratings agencies assert the significance of continuing with fiscal consolidation measures for fiscal sustainability to overcome any future financial pressures,” it added.
Last year, in its report issued in November 2022, S&P Global Ratings upgraded Oman’s credit rating from “BB-” to “BB” with a stable outlook. The agency indicated significant improvements in Oman’s fiscal performance and balance of payments positions. S&P stated that Oman has exerted significant efforts to reduce public debt benefiting from additional revenue, citing economic growth will be supported by higher hydrocarbon production and a pickup in investments.
The agency estimates that real gross domestic product (GDP) will grow by nearly 4 percent in 2022. Moreover, the S&P predicted that the non-oil sector will become the main growth catalyst in the coming years.
It is worth noting that S&P Global Ratings upgraded Oman’s credit ratings from ‘B+’ to ‘BB-’ with a stable outlook back in April 2022.
In a report issued in October 2022, Moody’s revised Oman’s outlook from ‘stable’ to ‘positive’ and affirmed its rating at ‘Ba3’. The agency pointed to an estimated real GDP growth of 4.5 percent in 2022 from 3 percent in 2021.
Although Moody’s expects oil prices to remain volatile and eventually decline to $50-70 per barrel in the medium term, the agency assumes oil prices will be elevated during 2023-2024 due to the ongoing tensions.
Moreover, Moody’s stated that the reduction in public debt would increase the resilience ahead of any potential oil price shock.
Fitch Ratings had also upgraded Oman’s credit ratings, in a recent report issued in August 2022, to ‘BB’ with a stable outlook thanks to an improvement in the financial position and decrease in public debt risks. The agency forecasts that Oman will achieve a budget surplus during 2022 and 2023.
In its report, Fitch forecasts a budget surplus in 2022 and 2023 of 5.5 percent and 3.4 percent of GDP, respectively, the first surplus recorded since 2013. Further, Fitch estimates a rise in real GDP to 4.4 5 percent in 2022 and 2.8 5 percent in 2023.
Furthermore, Fitch has stated that Oman has successfully fulfilled its 2022 funding requirements and reduced 2023 external maturities as part of its Liability Management.
