The Oman economy is expected to maintain strong growth momentum with social spending to rise and fiscal performance to remain favourable over the period from 2013-2015, according to ratings agency Standard and Poor's.
In a report released on Monday, S&P said, “While we anticipate that social spending will rise between 2013-2015, we expect that the government's resources will be sufficient to manage this increase without incurring a weakening in its fiscal buffers.”
“We could lower the ratings if political pressures intensify or if we see a sustained weakening in fiscal performance, as might occur following a sharp decline in the oil price. Alternatively, we could raise the ratings if the underpinnings of economic growth strengthen, raising per-capita income levels and improving diversification prospects.”
The ratings agency said that Oman's rating in the 'A' category is supported by the strength of its fiscal and external balance sheets, which provide a buffer to withstand fluctuations in oil prices.
“We expect Oman to maintain strong growth momentum. We estimate that economic growth remained at about five per cent in 2012, boosted by high government spending coupled with high private consumption and investment,” the report said.
It added, “Nonetheless, we remain concerned that a sharp and sustained deterioration in the country's terms of trade - for example, through a sharp decline in the oil export price - could materially weaken public finances and consequently force the government to tap its external assets to meet public spending needs.”
S&P said that diversification efforts and growth are likely to benefit from GCC funds, which will amount to about 1.5 per cent of Oman's GDP annually over ten years and are targeted at development projects.
The ratings agency expects the government budget outrun to remain in surplus during 2012-2015, although this is contingent on continued strong oil prices.