The issue ratings on Oman’s senior unsecured foreign-currency bonds and on the sukuk trust certificates issued by Oman Sovereign Sukuk SAOC have also been affirmed at ‘BBB’. The country ceiling has been affirmed at ‘A-’ and the short-term foreign- and local-currency IDRs at ‘F2’. Fitch forecasts that Oman’s budget deficit will narrow to 11.9 per cent of GDP in 2017 (compared with 21.4 per cent of GDP in 2016) on the back of higher oil prices and lower defence and investment spending.
‘A forecast recovery in oil prices, expenditure adjustment, and the implementation of new hydrocarbon projects play a key role in the expected fiscal consolidation in Oman. More fiscal measures are also in the pipeline. A review of corporate tax exemptions and an increase of tax rates are effective from January 2017 and will begin to have a cash flow impact in 2018. The government expects to implement an excise tax this July and VAT in 2018, which Fitch expects to have a meaningful impact on revenue starting in 2019’, Fitch said.
The ratings agency expects Oman’s real GDP to contract 0.3 per cent in 2017 before rebounding in 2018. ‘The contraction is led by Oman’s commitment to cut oil production in line with OPEC. Non-hydrocarbon growth will also slow amid government consolidation and somewhat tighter banking sector liquidity’, Fitch said.