S&P Affirms Oman’s Sovereign Ratings at ‘BBB-/A-3’: What It Means for Investors and Business Confidence in Oman
MUSCAT, SEPTEMBER 27 — Global credit rating agency S&P Global Ratings has affirmed the Sultanate of Oman’s sovereign credit ratings at ‘BBB-’ for long-term and ‘A-3’ for short-term foreign and local currency debt, maintaining a stable outlook. The transfer and convertibility assessment remains at ‘BBB’.
This affirmation reflects S&P’s confidence in Oman’s commitment to fiscal discipline and ongoing structural reforms, despite anticipated lower oil prices in the coming years.
S&P stated, “We expect the Omani government will remain committed to financial discipline throughout a potentially extended period of lower oil prices.” While economic diversification efforts are progressing, hydrocarbons continue to be the primary source of fiscal and export revenues.
According to S&P’s latest projections, Oman is expected to record a modest fiscal deficit of 0.5% of GDP in 2025, followed by broadly balanced budgets throughout 2026 to 2028. The agency also forecasts that Oman will maintain a net general government asset position of approximately 8% over the same period.
The stable outlook reflects a balance between the positive impacts of Oman’s fiscal and economic reforms and the country’s structural vulnerability to oil price fluctuations. S&P’s baseline scenario assumes Brent crude oil prices averaging $60 per barrel in 2025, rising to $65 per barrel from 2026 to 2028, compared to an average of $84 per barrel from 2021 to 2024.
Oman’s drive to reduce its dependence on oil is beginning to show results. Key initiatives include reorganizing government-related entities (GREs), asset sales to stimulate private sector growth, and the introduction of the region’s first personal income tax (PIT). Although PIT revenues are expected to be modest initially, they represent a crucial step toward diversified revenue streams.
S&P noted, “Measures that reduce the impact of oil price volatility—such as fiscal reforms, expenditure controls, and private sector development—are steadily strengthening Oman’s economic resilience.”
In the event of a significant drop in oil prices, S&P expects the government could mitigate fiscal pressures by reducing capital spending—currently about 1.7% of GDP—and adjusting non-obligatory transfers to savings funds.
On economic growth, S&P projects an average GDP growth rate of 2% annually between 2025 and 2028, supported by both hydrocarbon and non-hydrocarbon sectors. Non-oil activities, including construction, manufacturing, and services, now account for an estimated 73% of GDP, highlighting the economy’s gradual diversification.
Oil production is forecast to increase to 1.2 million barrels per day by 2028. However, weaker prices are expected to narrow current account receipts, leading to average current account deficits of 1.9% of GDP during the forecast period. S&P anticipates these deficits will be largely financed by foreign direct investment, which has averaged around 10% of GDP in recent years.
The agency also praised Oman’s advances in fiscal transparency and governance, noting the publication of quarterly GDP and fiscal data and the country’s participation in the IMF Article IV review process.
With non-hydrocarbon growth expected at 2.9% annually, driven by investments in manufacturing and tourism, S&P concluded that Oman’s medium-term outlook remains stable, supported by continuous reform momentum.
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The reaffirmation of Oman’s credit rating by S&P with a stable outlook signals strong fiscal discipline and ongoing structural reforms, providing a solid foundation for economic resilience despite oil price volatility. Businesses and investors should capitalize on the growing non-oil sectors, particularly manufacturing and tourism, while remaining cautious of oil market fluctuations that could impact fiscal stability. Smart entrepreneurs should focus on diversification opportunities driven by government reforms and increased private sector participation to leverage Oman’s economic transition.
