S&P Global Ratings revised Oman’s rating outlook to positive from stable, citing its improving fiscal position, progress on reforms and rising oil prices.
The credit rating agency also affirmed the country’s ‘B+/B’ long and short-term foreign and local currency sovereign credit ratings, it said in a statement.
“The positive outlook indicates that we consider Oman’s reform programme and the higher oil prices relative to 2020 will narrow fiscal deficits and slow the increase in net government debt over the next three years,” S&P said.
Oman's economy is expected to recover in 2021 from the dual impact of the Covid-19 pandemic and the collapse in oil prices last year. The economy is projected to grow by 2.5 per cent after a contraction of 2.8 per cent in 2020, the International Monetary Fund said last month.
The economic recovery will be led by 1.5 per cent growth in non-oil activity this year, compared with a 3.9 per cent contraction in 2020, the Washington-based fund said. Real oil gross domestic product is forecast to rebound by 3.5 per cent after shrinking by 1.7 per cent in 2020.
The sultanate has adopted various fiscal measures over the past year to support the economy during the Covid-19 pandemic, including interest-free emergency loans, tax and fee reductions and waivers, the flexibility to pay taxes in instalments and a Job Security Fund to support citizens who lost their jobs.
The fiscal deficit and government debt, which rose sharply in 2020, are projected to improve considerably over the medium term as Oman implements the Medium-Term Fiscal Balance Plan, the IMF said.
S&P estimates that Oman’s net debt will continue to increase to 30 per cent of GDP in 2024, from about 13 per cent in 2020.
The positive outlook indicates that we consider Oman’s reform programme and the higher oil prices relative to 2020 will narrow fiscal deficits and slow the increase in net government debt over the next three years
S&P Global Ratings
“Oman faces large external debt maturities of $11 billion over 2021-2022. We expect fiscal deficits and maturing debt will be funded by a mixture of external debt; asset drawdowns from the Oman Investment Authority and Petroleum Reserve Fund; and, to a smaller extent, domestic debt,” the rating agency said.
If the government fully implements its reforms programme and oil prices turn more favourable, the pace of increase in Oman’s net debt could slow significantly below S&P’s forecast of slightly above 5 per cent of GDP on average over 2021 to 2024, the agency said.
S&P also expects a significant reduction in Oman’s fiscal deficit to 4.2 per cent of GDP in 2021, from 15.3 per cent in 2020. This will be driven by higher oil prices, proceeds from value-added tax and fiscal reforms, which include revised salary scales for new government employees, lower allowances and an increase in electricity and water tariffs.
The sultanate is also planning a new personal income tax on high-wage earners that is likely to be implemented in 2023. Oman will also soon unveil an Investor Residence scheme that seeks to provide long-stay residency visas to people who invest in the country, according to local media reports that quoted the Ministry of Commerce, Industry and Investment Promotion last week.
In November last year, Oman opened up its real estate market to foreign investors further by allowing them access to a wider selection of residential properties as part of reforms aimed at improving the country’s fiscal position.
Oman’s real GDP is estimated to grow by 1.7 per cent this year and then accelerate to 3.1 per cent on average in 2022-2023 as oil and gas production ramps up after Opec+ production limits are eased, according to S&P estimates.
“Economic activity will start to pick up in 2021. However, given the ongoing oil production limits under the Opec+ agreement, Covid-19-induced lockdown measures and the slow pace of vaccinations to mid-2021, we expect only a mild economic recovery of about 1.7 per cent this year,” S&P said.
A stronger economic rebound from 2022 will be supported by higher oil and gas production and non-oil sector growth, the agency added.
Meanwhile, the government’s liquid assets, estimated to account for 50 per cent of GDP in 2021, supported Oman’s ratings, S&P said.
The rating agency said it expected countries in the GCC to provide timely support to Oman in the unexpected event of a significant deterioration in the external reserves that support the Omani rial’s peg to the US dollar.
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December 11: 'My husband died, so what happens to the Dh240,000 he owes in the UAE?'
JL, a housewife from India, wrote to us about her husband, who died earlier this month. He left behind an outstanding loan of Dh240,000 and she was hoping to pay it off with an insurance policy he had taken out. She also wanted to recover some of her husband’s end-of-service liabilities to help support her and her son.
“I have no words to thank you for helping me out,” she wrote to The Debt Panel after receiving the panellists' comments. “The advice has given me an idea of the present status of the loan and how to take it up further. I will draft a letter and send it to the email ID on the bank’s website along with the death certificate. I hope and pray to find a way out of this.”
November 26: ‘I owe Dh100,000 because my employer has not paid me for a year’
SL, a financial services employee from India, left the UAE in June after quitting his job because his employer had not paid him since November 2018. He owes Dh103,800 on four debts and was told by the panellists he may be able to use the insolvency law to solve his issue.
SL thanked the panellists for their efforts. "Indeed, I have some clarity on the consequence of the case and the next steps to take regarding my situation," he says. "Hopefully, I will be able to provide a positive testimony soon."
October 15: 'I lost my job and left the UAE owing Dh71,000. Can I return?'
MS, an energy sector employee from South Africa, left the UAE in August after losing his Dh12,000 job. He was struggling to meet the repayments while securing a new position in the UAE and feared he would be detained if he returned. He has now secured a new job and will return to the Emirates this month.
“The insolvency law is indeed a relief to hear,” he says. "I will not apply for insolvency at this stage. I have been able to pay something towards my loan and credit card. As it stands, I only have a one-month deficit, which I will be able to recover by the end of December."
Stuck in a job without a pay rise? Here's what to do
Chris Greaves, the managing director of Hays Gulf Region, says those without a pay rise for an extended period must start asking questions – both of themselves and their employer.
“First, are they happy with that or do they want more?” he says. “Job-seeking is a time-consuming, frustrating and long-winded affair so are they prepared to put themselves through that rigmarole? Before they consider that, they must ask their employer what is happening.”
Most employees bring up pay rise queries at their annual performance appraisal and find out what the company has in store for them from a career perspective.
Those with no formal appraisal system, Mr Greaves says, should ask HR or their line manager for an assessment.
“You want to find out how they value your contribution and where your job could go,” he says. “You’ve got to be brave enough to ask some questions and if you don’t like the answers then you have to develop a strategy or change jobs if you are prepared to go through the job-seeking process.”
For those that do reach the salary negotiation with their current employer, Mr Greaves says there is no point in asking for less than 5 per cent.
“However, this can only really have any chance of success if you can identify where you add value to the business (preferably you can put a monetary value on it), or you can point to a sustained contribution above the call of duty or to other achievements you think your employer will value.”
