Last week’s ratings upgrade by Fitch Ratings effectively means that all of the Big Three of international rating agencies are now broadly in agreement about the buoyant outlook of the Omani economy going into 2022.
New York-headquartered Fitch revised the Sultanate of Oman’s outlook to stable from negative while affirming the sovereign's Long-Term Foreign- and Local- Currency Issuer Default Ratings (IDR) at 'BB-'.
It came just two months after S&P Global Ratings revised its outlook on the Omani economy to positive from stable. Also based in New York, the rating agency affirmed its ‘B+/B’ long-term and short-term foreign and local currency sovereign credit ratings. The transfer and convertibility assessment was set at 'BB-'.
Moody's Investors Service followed suit in October with a revision in the outlook on the Government of Oman's issuer rating to stable from negative and affirmed its long-term issuer and senior unsecured ratings at Ba3. Moody's also affirmed the Government of Oman's (P)Ba3 senior unsecured medium term note programme rating.
The trio of the world’s most influential rating agencies cited significant improvement of key fiscal metrics, most notably the dramatic shrinkage of the budget deficit for 2021 aided by buoyant oil prices and a steady uptick in non-oil revenue.
Also spurring the rapid evolution of the Sultanate of Oman’s credit rating – from junk status just status barely two years to stable/positive today – are the government’s fiscal reforms enshrined in its landmark Medium Term Fiscal Plan (MTFP) unveiled in late 2020.
Among the key metrics that underscore this turnaround in the Omani economy is the budget deficit which narrowed to 3.4 per cent of GDP in 2021, down from 16.1 per cent of GDP in 2020. Oil and gas revenues also climbed by a third, driven largely by a 28 per cent rise in Oman's average fiscal oil price.
Fitch also forecast a strong rise in real GDP growth to 3.1 per cent in 2022 before steadying at 2.3 per cent in 2023, driven by stronger hydrocarbon growth next year. However, non-oil growth is expected to moderate at just over 2 per cent on average.
Earlier, S&P Global Ratings cited the “solid path” charted by the Omani government to reduce historically high fiscal deficits, and backed by a “strong political will” to implement reform measures. It noted that the Medium Term Fiscal Plan (2021 – 2025) is expected to produce a net positive outcome.
“...if the government fully implements its reform programme and oil prices turn more favourable than we had assumed, the pace of increase in net debt could slow significantly below our current forecast of slightly above 5 per cent of GDP on average over 2021-2024,” S&P stated.
Significantly, the improved outlooks by all three major ratings agencies bode well for the Omani government’s ability to access international debt markets at competitive interest rates and terms and issuance options of choice as well.
A key goal of the MTFP has been to reverse the trend of downgrades of the country’s credit ratings by all three leading ratings agencies. This was sought to be achieved by improving the country’s overall financial position, reducing its public debt and improving the overall credit environment in the Sultanate of Oman.