S&P Global Ratings has raised Oman’s long-term sovereign credit rating to “BB” from “BB-” with a stable outlook as the country’s economy receives a boost from government reforms and higher oil prices.
A BB rating indicates that a debtor is less vulnerable in the near-term but faces economic uncertainties.
“Oman's fiscal and external positions are benefiting from government reforms and higher oil prices,” said the ratings agency.
“In addition to rebuilding fiscal buffers on the back of windfall oil revenue, the Omani government has continued to reduce the budget's reliance on oil receipts, in line with its medium-term fiscal plan to 2025,” it added.
Like other Gulf countries, Oman is benefiting from a surge in economic activity tied to higher oil prices. Brent, the benchmark for two thirds of the world’s oil, is currently trading at about $83 a barrel after falling to less than $30 in 2020.
Last week, the sultanate launched a three-year fiscal stability programme to add to the momentum of its economic recovery from the pandemic-driven slowdown and support the development of the country’s financial sector.
Oman’s economy is set to expand 4.3 per cent in 2022, supported by increased hydrocarbon production and continued recovery of non-hydrocarbon economic activity.
The sultanate’s economy rebounded 3 per cent last year after a 3.2 per cent contraction in 2020, helped by strong vaccination efforts and the relaxation of Covid-19 restrictions.
Oman’s oil and gas industry makes up for about a third of the country’s GDP and about 60 per cent of the goods exported.
S&P said it expects the country's real GDP to grow 3.9 per cent in 2022, up from 3.1 per cent last year, largely due to increasing hydrocarbon production under the current Opec+ agreement.
The Opec+, a group of 23 oil producing countries, has reduced its collective output by two million barrels per day amid demand concerns.
“We assume [Oman’s] oil production will increase to 1.14 million bpd in 2025 from an estimated 1.04 million bpd this year and 966,000 bpd in 2021,” said the ratings agency.
S&P sees Oman’s non-oil growth at 2.5 per cent in 2024 and 2025, up from 1.8 per cent this year.
“Having held back on capital expenditure over the past two years the government and its public entities will now ramp up investment, in our view,” said the ratings agency.
The Arab country has been using its windfall oil revenue to reduce its debt, S&P noted.
Government debt will fall to $46.6 billion by the end of this year from $54.7 billion in 2021, the ratings agency estimates.
Oman expects to bring in more than nine billion rials ($22.5 billion) a year from tourism by 2040 as it bids to diversify its economy away from oil.
One of the economic pillars of Oman's 2040 Economic Vision is to increase revenue from tourism.
The contribution of the tourism sector to GDP was 2.4 per cent in 2021, and the country is aiming to increase that to 5 per cent by 2030 and 10 per cent by 2040.