Moody’s Investors Services has downgraded the government of Oman’s long-term issuer and senior unsecured bond ratings from Baa3 to Baa2, with an outlook that remains negative in the near-term.
In a statement, Moody’s noted that it expects Oman’s “fiscal and external metrics” to continue to weaken, partly due to institutional policy constraints.
Additionally, Moody’s noted that subdued economic growth over the course of the next few years may “weaken economic resiliency.”
Over the next five years, Moody’s forecasts that Oman’s fiscal deficit will remain large, at approximately five to seven percent of GDP.
“With persistent sizeable deficits, Moody’s projects that the government’s debt burden will rise in the coming years, surpassing 50 percent of GDP by 2019 and rising above 60 percent by 2021, from 40.5 percent in 2017,” the Moody’s statement noted.
Moody’s added that the government’s planned expenditure cuts and additional revenue-raising measures will only narrow the deficit to a limited extent, noting that large increases in social spending over the last seven years “pose significant policy hurdles to faster fiscal consolidation.”
“While the government aims to keep the civil servants' wages and benefits bill broadly unchanged in nominal terms over the next few years, Moody's does not foresee a significant nominal reduction of non-interest government spending over the medium term,” the statement said.
Oman’s real GDP growth will be subdued due to constrained growth in the non-hydrocarbon sector, Moody’s predicted.
In January, Oman announced that it expected GDP growth of 3 percent or more in 2018, largely due to recovering oil prices and diversification efforts. The International Monetary Fund (IMF) predicted a similar figure, 3.1 percent.
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