‘The downgrade reflects our view that the Omani government’s heightened external financing needs have resulted in the economy’s large net external asset position (external assets exceeding external liabilities) declining to a level insufficient to mitigate the risk from its volatile export revenue base’, S&P said in a statement.
S&P estimates that Oman’s net external asset position has materially declined to 30 per cent of current account receipts in 2017, from 60 per cent in 2016. The ratings agency also estimates that Oman’s fiscal and current account deficits were higher in 2016 than it had anticipated, and GDP per capita lower.
‘Based on our projections for continued sizable current account deficits, we expect Oman to be in a narrow net external debtor position of 12 per cent in 2020. Due to oil prices remaining relatively low and Oman’s dependence on the hydrocarbon sector for export receipts (60 per cent of total exports in 2016), we expect large current account deficits above ten per cent of GDP in 2017 and 2018, before they gradually decline to six per cent of GDP in 2019 and 2020’.