Muscat: Fitch Ratings has revised, in a recent report issued on Monday, Oman’s outlook to stable from negative and affirmed the rating at BB-.
According to Fitch, the revision of the outlook reflects actual improvements in key fiscal metrics including government debt and the budget deficit, driven by fiscal reforms and higher oil prices, and a lessening of external financing pressures relative to recent years.
Fitch has said in the report that the government has made progress with the implementation of the Medium-Term Fiscal Plan (MTFP), which aims to balance the budget and lower government debt to GDP to 61% by 2025.
The agency estimates that the budget deficit narrowed from 16.1% of GDP in 2020 to 3.4% of GDP in 2021. It also indicated that the deficit will continue to decline to 1.6% of GDP in 2022 given another strong year for oil and gas revenue, a full year of VAT revenue, lower oil and gas capex on budget (after establishing Energy Development Oman).
Moreover, the agency assumes real GDP growth to accelerate to 3.1% in 2022 and steady to 2.3% in 2023, driven by stronger hydrocarbon growth in 2022.
The agency expects the MTFP timely implementation will lower the fiscal breakeven oil price to around USD60/b in 2024-2025 from above USD80/b in the past five years.
According to Fitch, Oman’s credit rating might be upgraded in case the government has broadly committed to implement the fiscal balance programme or oil prices exceeded the expected levels.
It is worth noting that Moody’s has recently revised its outlook on Oman from stable to positive. Also, S&P Global Ratings has revised earlier this year its outlook from stable to positive. This is attributed to the policy responses to economic and health challenges and improved oil prices, which will reduce fiscal deficits and slow the increase in net government debt. –ONA
