MUSCAT: Oman's economic and fiscal landscape shines with optimism, as evidenced by notable improvements in several key areas, according to international ratings agency Capital Intelligence (CI). The Cyprus-based agency said on Saturday that its credit rating outlook for the Sultanate of Oman is positive, indicating the potential for an upgrade in the next 12 months. This optimistic outlook stems from Oman's ongoing commitment to reducing central government debt to a prudent threshold of 30 per cent of Gross Domestic Product (GDP) and the government's dedication to implementing moderate fiscal reforms to sustain budget surpluses.
One of the most striking developments is the Omani government budget, says CI. In 2022, the nation managed to reverse a deficit of 2.8 per cent of GDP from the previous year into a substantial surplus of 7.5 per cent. This impressive transformation was driven by prudent financial management and fiscal discipline, the ratings agency noted.
Government debt also witnessed a commendable decline, falling from 40.0 per cent of GDP in 2022 to 38.6 per cent in the first half of 2023. Projections point toward a further reduction to 37.2 per cent by the end of 2023. This debt reduction has not only bolstered Oman's fiscal health but has also significantly alleviated the burden of interest payments.
The State-Owned Enterprises (SOEs) have followed suit with a noteworthy reduction in their debt levels, dropping from 40.7 per cent of GDP in 2021 to around 29 per cent in 2022. While a portion of this debt carries government guarantees, signifying a fiscal risk, it's reassuring that this risk is on a downward trajectory, diminishing the potential impact, CI pointed out.
Looking ahead, the fiscal outlook is promising, says Capital Intelligence. The baseline scenario is anchored on the assumption of consistently high hydrocarbon prices for the years 2023 to 2025, averaging at USD 72 per barrel. This not only exceeds the budget's fiscal breakeven oil price of USD 67 per barrel but also results in the anticipation of a central government budget surplus.
Oman's external position reflects strength and resilience, according to the ratings agency. The current account swung from a deficit of 0.4 per cent of GDP in 2021 to a surplus of 3.2 per cent in 2022, and this positive trend is expected to continue. Forecasts indicate that the current account will consistently post surpluses, averaging 1.4 per cent of GDP from 2023 to 2025. Additionally, foreign currency reserves at the central bank remain substantial, providing ample coverage for external debt obligations and mitigating external liquidity risks.
Oman's economic growth is strong, largely attributable to the thriving hydrocarbon sector. Real GDP expanded by an estimated 4.7 per cent in the first quarter of 2023, and projections indicate a continued average growth rate of 3.3 per cent from 2023 to 2025, it added.