Fitch revises nation's outlook to stable, affirms rating at 'BB-'

MUSCAT: International ratings agency Fitch has revised the Sultanate of Oman’s outlook to stable from negative while affirming the sovereign’s Long-Term Foreign- and Local- Currency Issuer Default Ratings (IDR) at ‘BB-‘.

The revision of the outlook reflects actual improvements in, and the expected evolution of, key fiscal metrics including government debt/GDP and the budget deficit, driven by higher oil prices and fiscal reforms, and a lessening of external financing pressures relative to recent years even as external funding needs remain high, the New York based credit ratings agency said on Monday.

Fitch noted that the country’s budget deficit narrowed to 3.4 per cent of GDP in 2021, from 16.1 per cent of GDP in 2020. Hydrocarbon revenue grew by a third, driven largely by a 28 per cent rise in Oman’s average fiscal oil price, and likely accounted for more than half of the narrowing in the budget deficit, it stated.

Real GDP growth is forecast to accelerate to 3.1 per cent in 2022 and steady to 2.3 per cent in 2023, driven by stronger hydrocarbon growth next year, while non-oil growth will be moderate at just over 2 per cent on average, said Fitch. Non-oil growth will be supported by further recovery from the pandemic and the completion of large projects, but constrained by the impact of fiscal consolidation.

The report also applauded the Omani government on the progress it had made with implementation of its medium-term fiscal plan (MTFP), which aims to balance the budget and lower government debt/GDP to 61 per cent by 2025.

“In January-October non-oil revenue grew 40 per cent y-o-y, helped by the introduction of a 5 per cent VAT in April, dividends to the budget from the Oman Investment Authority (OIA) and gradual economic normalisation, as Covid-19 related-restrictions were lifted and Oman’s vaccination drive accelerated. As of late November, 84 per cent of the targeted population had had two vaccination doses and a booster programme had begun,” Fitch commented.

Total spending declined 6 per cent y-o-y, according to preliminary figures, helped by the 4th quarter 2021 shift of the majority of hydrocarbon spending off budget to Energy Development Oman (EDO), the state-owned enterprise (SOE) to which the government transferred its stake in Petroleum Development Oman, the main oil company in the country, it added.