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18 July 2024

Oman can comfortably cover 2009-10 deficits: Moody's

Sultan of Oman, Qaboos bin Said. The sultanate's economy can 'comfortably' cover budget deficits in 2009 and 2010, says Moody's. (AFP)

By Reuters
Non-Opec oil exporter Oman has a "comfortable" cushion of financial assets to cover any budget deficits in 2009 and 2010 but the state remains vulnerable to oil prices changes, Moody's Investors Service said on Wednesday.

Economic growth in Oman is likely to fall by more than half to 3.3 percent in real terms this year from 7.1 per cent in 2008, although the size of the economic at current prices would drop 13.8 per cent as a result of the oil price slump, Moody's said.

"The government has ample resources with which to finance the expected scale of its deficits in 2009, 2010 and potentially in future years," the ratings agency said, maintaining Oman's A2 foreign currency and bond rating and "stable" outlook.

"However, the government's comfortable cushion of financial assets is one of the main props of our high sovereign ratings for Oman. Hence, if they were to be depleted significantly, our credit ratings for Oman may be adversely affected."

Like its neighbours in the world's top oil-exporting region, Oman accumulated massive surpluses as oil prices rallied in the six years to mid-2008.

Moody's said the "main economic risk" facing Oman was its vulnerability to oil price changes. Oil prices slumped towards $34 a barrel on Wednesday, less than a quarter of their record level last July.

Around 85 per cent of the Omani government's total revenue comes from oil and gas receipts, Moody's said, adding it expected Oman to post a budget deficit of about 6 per cent of GDP this year.

In January, Oman projected a $2.1 billion budget deficit for 2009 based on an average oil price of $45 a barrel.