Assets cushion Oman
Moody's Investors Service yesterday said it has maintained A2 investment-grade sovereign ratings of Oman due to extensive offshore assets that will enable the country to fund projected deficits without resorting to debt accumulation.
It also gave stable outlook to the country.
"The government's extensive offshore financial assets will enable it to provide fiscal stimulus and fund projected deficits without resorting to debt accumulation, at least over the short- to medium-term," said Tristan Cooper, Moody's Vice-President/Senior Analyst.
The government's gross financial assets plus the central bank's foreign exchange reserves amounted to around 75 per cent of GDP at the end of 2008, while the government's debt remained very small.
Moody's said the enhanced volatility of Oman's economic performance because of its heavy reliance on oil and gas exports. Real growth is expected to slow significantly in 2009.
Nevertheless, the country's nominal GDP per capita, which is likely to contract by around 15 per cent this year, will continue to rank highly on the global scale. Moody's considers Oman to have a high level of economic strength.
One challenge that Oman faces is the rising cost of oil production. "It is encouraging that Oman's oil output has recovered since its trough in 2007, but the use of expensive enhanced oil recovery techniques is pushing up the cost of this production," said Cooper.
The average cost of pumping oil in Oman rose from around $8/barrel in 2005 to $16/barrel in 2008 and is likely to rise further.
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