Oman's growth outlook ‘vulnerable to oil prices’
Singapore, August 19, 2013
Oman's A1 rating with stable outlook is based on the economy's robust growth outlook and the government's sound fiscal metrics, but both are vulnerable to a downturn in global oil prices, said Moody's Investors Service in a report.
The rating agency's report is an update to the markets and does not constitute a rating action.
Moody's assessment of Oman's economy strength reflects comparatively high levels of per-capita income and the medium-sized economy's robust outlook in the long term due to ongoing economic diversification.
The rating agency expects growth of 4.6 per cent in 2013 and 4.1 per cent in 2014, supported by the government's efforts to diversify the economy away from the hydrocarbon sector. These efforts should be supported by Oman's openness to international trade and its liberal investment regime.
Moody's also notes that the A1 rating is supported by the government's persistent budget surpluses (barring a 0.3 per cent deficit in 2009), very low levels of debt (5.2 per cent of GDP at year-end 2012), and its strong net financial asset position. High domestic savings rates and a healthy banking sector complement the government's sound finances.
Moody's says that Oman's major credit challenges stem from its economic and fiscal vulnerabilities arising from the oil and gas sector, which continues to contribute a significant share to GDP (45 per cent of GDP on average between 2000 and 2011). Moreover, Oman's fiscal breakeven oil price is among the highest in the GCC and showed a very strong increase ($80) between 2003 and 2012.
This is particularly important since Oman's proven reserves are smaller than those of other major oil producers and are increasingly costly to explore.
In addition, Moody's notes that although Oman did not experience social and political unrest as witnessed in Egypt and Tunisia as a result of the Arab Spring, regional geopolitics elevate event risks to a moderate level. – TradeArabia News Service
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