Standard & Poor’s has affirmed its BBB-/A-3’ rating to Oman, even as lower oil prices keep adding pressure on the Arabian Gulf oil exporter.
The ratings agency added that the sultanate’s outlook was stable.
“The stable outlook reflects the balance between our expectation that Oman can broadly maintain its fiscal and external stock positions over 2016-2019 against risks from weakening economic income, fiscal and external flows,” it said.
Oman’s budget deficit was at 16 per cent of GDP last year. S&P estimates that as a result of the government’s moves to cut spending and increase corporate taxes, the deficit will decline to 13 per cent of GDP this year.
That is in line with the Omani government’s forecasts and also with the outlook for the sultanate’s neighbours – the IMF expects the GCC countries collectively to run a budget deficit of 12.3 per cent of GDP this year and 10.8 per cent next year.
S&P noted that Oman increased its oil output to a record high of 358 million barrels last year, up 4 per cent on the previous year, with exports rising by 5.5 per cent to 308 million barrels. However, the agency said that this increase was not enough to offset the negative effect of lower oil prices, with the government’s oil revenue falling by about 40 per cent.
The S&P affirmation came only days after its rival ratings agency Moody’s downgraded its credit ratings for the country to Baa1, three notches above junk. Moody’s noted that Oman has considerably fewer sovereign wealth fund assets than its Gulf neighbours, which limits its ability to weather low oil prices. It added that the sultanate depends on oil for 87 per cent of its government revenue.
Gulf states lost US$390 billion in export earnings last year, and are set to lose a further $140bn this year because of the fall in oil prices.
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