Capital Intelligence affirms Oman’s ratings at ‘BBB-’
International ratings agency Capital Intelligence Ratings (CI Ratings) announced that it has affirmed Oman’s long-term foreign currency and long-term local currency ratings at ‘BBB-’. CI Ratings also affirmed its short-term foreign currency and short-term local currency ratings at ‘A3’.
In a statement on its website, it said that Oman’s ratings are supported by moderate fiscal and external buffers and a sound banking system.
However, CI Ratings revised its outlook on Oman’s long-term foreign currency and long-term local currency ratings to ‘negative’ from ‘stable’.
The change in the outlook to negative reflects CI Ratings’ expectation that Oman’s public and external debt will continue to increase markedly over the forecast horizon due to large deficits in the government budget and the current account.
‘While the government has introduced some fiscal consolidation measures, these are unlikely to be sufficient to reverse the deterioration in the public finances in the absence of a significant increase in hydrocarbon prices,’ CI Ratings said. It said that Oman’s public and external finances have been adversely affected by the sharp decline in oil and gas prices since 2014.
‘The strong decrease in hydrocarbon export revenues has led to a very large government budget and current account deficits, which are estimated at 8.2 per cent and 6.8 per cent of GDP, respectively, in 2019.’ In our view, CI Ratings said, placing the public finances on a more sustainable trajectory requires substantial fiscal consolidation measures on both the revenue and expenditure sides.
CI Ratings projects a modest rebound in Oman’s non-oil GDP this year driven by increases in public expenditure and rising manufacturing production capacities, with selected largescale investment projects scheduled to begin.