MUSCAT, APRIL1
S&P Global, the world’s foremost provider of credit ratings and financial analytics, announced on Friday night that it has revised Oman's outlook to positive, while affirming its ratings at "BB".
The New York based international agency cited in this regard the Sultanate of Oman’s continuously improving fiscal performance. It noted in particular the Omani government’s efforts to bolster the country’s financial performance and sustain economic development – measures that have contributed to a significant strengthening of Oman’s fiscal position far exceeding expectations. These successes, the agency further pointed, would enhance the economy’s resilience to potential shocks brought on by instability in oil markets.
The steadily improving fiscal performance, underpinned by supportive policies and programmes, was reflected in the significant reductions in public debts, the agency said. This was also evident from the strong growth witnessed by the nominal GDP and the decline in total debt to GDP from more than 60 per cent in 2021 to about 40 per cent in 2022, it stated.
According to S&P Global, Oman’s public debt is projected to decline to around RO 16.5 billion, representing 37 per cent of the gross domestic product (GDP) by the end of this year. The diminishing public debt trend, coupled with financial surpluses expected during 2023 and 2024, will further improve Oman’s financial situation, it said.
The agency also cited the government’s success in rationalizing public spending in 2022 notwithstanding buoyant international oil prices and strong revenue earnings from oil exports. Consequently, real GDP growth is anticipated to average at around 2.5 per cent during the 2023-2026 period, with the non-oil sector expected to grow by an average of about 3.5 per cent during the 2025-2026 timeframe.
S&P Global also pointed out that the price of Brent crude is expected to reach $90 per barrel in 2023, $80 per barrel in 2024, and $55 per barrel in 2025.
Oman's credit rating, it further noted, may see further improvement in the future if the measures currently adopted by the government continue to translate into dividends for the country’s financial position, as the public debt rate and the cost of servicing the borrowing portfolio continue to decline.
At the same time, the agency warned that the credit rating could be impacted if financial measures are slackened or if other unforeseen circumstances contribute to an increase in the fiscal deficit, thereby affecting the balance of payments situation.
Notably, the Omani government has managed to reduce the public debt to RO 16.6 billion during the first quarter of 2023.
Welcoming the latest outlook statement by S&P, Omani economic expert Mohammed al Mudhiani said: “The optimistic outlook highlights Oman’s adaptability to anticipated future oil market fluctuations.” Speaking to the Observer Al Mudhiani underlined the importance of the positive credit rating to Oman’s efforts to tap international debt markets at competitive costs. “The credit rating plays a critical role in determining loan interest rates - the cost of interest is influenced by several factors, one of which is the credit rating.” According to the economist, the improved rating will enable Oman to benefit from reduced interest rates through refinancing. “The ongoing progress will contribute to lowering interest rates on specific loans. Furthermore, due to the Sultanate's continuous improvement and exceptional management, it has saved more than RO 380 million and RO 127 million during the previous year,” he added.
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