New York: Fitch Ratings on Wednesday revised the outlook of the Sultanate of Oman from stable to positive, and affirmed the credit rating of the country at 'BB+'. This is attributed to the continued reduction of government and state-owned entities (SOEs) debt, growing record of fiscal prudence and the accumulation of net sovereign foreign assets.
The agency projects Oman's budget to post a surplus of 2% of GDP in the current year (2024). It forecasts the surplus to narrow to 0.7% in 2025 and to turn to a minor deficit of 0.2% in 2026. This assumes Brent oil price of USD 70 per barrel in 2025 and USD 65 in 2026. The agency estimates Oman's fiscal breakeven Brent oil price at USD 67-70 per barrel.
Further, Fitch Ratings projects Oman's non-oil primary balance to continue to gradually improve with spending moderation and strengthened tax collection. It estimates the non-oil primary deficit as a share of non-oil GDP at 27% in 2024, down from 43% in 2020 and forecasts it to reach close to 24% in 2026.
Additionally, the agency projects overall GDP growth of 1.8% in 2024, after 1.2% in 2023, supported by non-oil growth of 3.7%. Domestic consumption, robust foreign investment and tourism will maintain non-oil growth above 3% in 2025 and 2026.
Fitch Ratings projects government debt/GDP will fall to 34% of GDP at end-2024 and 33.3% by 2026 from 37.5% at end-2023 and 68% in 2020. The agency expects Oman to have reduced external debt by nearly USD 2.8 billion in 2024 to USD 26.6 billion (24% of GDP).
External debt repayments by government and SOEs have assuaged liquidity risks and Oman’s sovereign net foreign assets position of foreign assets + FX reserves - government debt) strengthened to close to 10% of GDP in 2024, from -9% of GDP in 2020.
The agency affirmed that the credit rating of the Sultanate of Oman could be upgraded if the country maintains a prudent fiscal stance consistent with a decline in government debt/GDP, growth of non-oil revenues as well as external buffers.
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