Fitch Ratings has affirmed Oman’s Long-Term Foreign-Currency Issuer Default Rating at ‘BB+’ with a Stable Outlook. The ratings are supported by Oman’s higher GDP per capita and World Bank Governance Indicators than peer group medians, recent budget reforms, and decreasing government debt/GDP. Fitch projects Oman’s budget surplus to narrow in the coming years, with fiscal breakeven Brent oil price estimated at $65-70 per barrel.
The agency expects OPEC+ to unwind production quotas from the fourth quarter of 2024, mitigating some revenue losses from lower oil prices for Oman. Non-oil revenue is expected to grow, with progress towards implementing personal income tax. The extension of the social safety net in 2024 will be offset by lower spending on fuel subsidies as oil prices decline. Government debt/GDP is forecasted to decrease to 31.9 percent in 2025 from 36.5 percent in 2023.
Oman continues to pre-pay its debt using budget surpluses from high oil prices, with a 10 percent drop in external debt forecasted for the first half of 2024. The Petroleum Reserve Fund stands at around $3 billion, reducing liquidity risks. Oman’s external position has improved, with a positive sovereign net foreign assets position in 2023. SOEs have helped by reducing debt and asset sales generating internal funding.
Sovereign external maturities and external debt payments by SOEs are less burdensome in the coming years. Growth is expected to bounce back in 2024, with overall GDP growth projected at 1.8 percent. Non-oil growth is forecasted at 2.7 percent in 2024, driven by domestic consumption, foreign investment, tourism, and downstream hydrocarbons. Fitch projects non-oil growth at 2.8 percent in 2025, with risks tilted towards faster growth. Green hydrogen projects are still in the study phase.
