Improved credit ratings to attract more investors to Oman

Muscat: Improved credit ratings assigned to the Sultanate of Oman by the three major global credit ratings agencies will help bring more investors to the country, which in turn will speed up economic growth and job creation.

That’s according to Dr Ahmed Al Hooti, the head of economic research at the Oman Chamber of Commerce and Industry (OCCI), who added that the benefits of the improved ratings will be seen both in the short and long-term.

Fitch changed Oman’s outlook from negative to stable, while both Moody’s and S&P Global Ratings upgraded their outlook from stable to positive.

Oman News Agency (ONA) reported this change was due to the policies and procedures undertaken by the Sultanate to address economic and health challenges, coupled with improved oil prices leading to a decline in fiscal deficits and net government debt over the next three years.

“The advantage that these improved ratings will give Oman is the ability to potentially attract more investors, which in turn will lead to them investing their money into the country,” said Al Hooti. “This will help expand the economy, which in turn will lead to more job opportunities.”

“Another way in which this helps is that the ratings provided by these organisations are followed by companies and investors around the world, so a better rating will be noticed by anyone who is keen on expanding their operations to Oman,” he added.

Al Hooti went on to say, “Furthermore, a positive rating also means that if Oman needs to borrow more money from overseas lenders in the future, they can do so at softer interest rates. However, I believe that right now, Oman is in the process of reducing its deficit, which has been helped by the increase in oil prices that have gone up from about $50 a barrel to over $70 a barrel in about a year’s time.”

According to the Dubai Mercantile Exchange, the value of Oman crude futures rose from $51.06 a barrel on 31 December, 2020, to $76.45 on 28 December, 2021.

“However, if we have a strong banking system within the country, then there will be no need for us to rely on external lending for us to get loans to develop our economy,” said Al Hooti.

“Such facilities will only help make our economy more resilient. The reason we have been able to repay the loans taken, and reduce our deficit, is because of the government policies that were taken in this direction…that has resulted in our ratings going up.”

A key policy is the Medium Term Fiscal Plan for the years 2020-2024, which was developed with the objective of achieving fiscal balance in the medium term. The implementation of this plan will take place alongside several economic programmes aimed to improve the business environment, stimulate investments, and a social safety net to reduce the impacts of fiscal measures on select societal sections.

ONA added that Moody’s revised ratings were on the basis that oil prices remain above $60 to $65 a barrel in 2022-23, which will ensure the fiscal deficit will likely remain small in the medium term.

In turn, this will likely lead to a large and durable reduction in the government’s gross financing needs to less than 10 percent of GDP per annum during the mentioned time-period, from more than 22 per cent of GDP in 2020. Moody’s expects Oman’s current account deficit to decline below four per cent of GDP in 2021-23 from more than 13 per cent of GDP in 2020.

“Let us not forget that the ratings system is only one aspect of measuring financial and economic progress,” revealed Al Hooti.

“What we need is to create more employment opportunities and more diversification in our economy, by asking companies in manufacturing, agriculture, logistics, and so on, to work directly and in partnership with those in oil and gas.”

The same was reflected by Kenneth Macfarlane, office managing partner – Oman, for KPMG Lower Gulf. KPMG recently released a global report which said that CEOs believe optimism is back in the boardroom, despite the emergence of COVID variants.

The KPMG 2021 CEO Outlook, which interviewed 1,325 global CEOs from 11 major markets, found that 60 per cent of leaders are confident about the global economy’s growth prospects over the next three years, up from 42 per cent in the January/February’s pulse survey.

Macfarlane said, “Well managed by government leadership, Oman has handled the pandemic effectively and is turning a crisis into an opportunity for growth. This stability creates a foundation for CEOs to project a positive, optimistic environment and encourage employee productivity and creativity.”

“To tackle the potential environmental challenges, CEOs would do well to invest in digitalization and disruptive technology,” he added. “CEOs are also pushing investment in environment, social and corporate governance strategies up the business agenda to deliver expected returns and help build a more equitable and sustainable future.”