(MENAFN- Muscat Daily) Moody's Investors Service has affirmed Oman's A1 government bond rating but changed the rating outlook to negative from stable.
The rating affirmation is supported by Oman's intrinsic economic and fiscal strengths and the government's sizable asset buffers which we believe will not likely be significantly undermined over the next year or two in our base case oil price scenario the ratings agency said on Friday.
Moody's said the rating action does not affect Oman's foreign currency country ceilings which remain unchanged at Aa3 for bonds and A1 for deposits. The short-term foreign currency ceilings are unchanged at Prime-1 and Oman's local currency country risk ceilings remain unchanged at Aa3.
The ratings agency noted that Oman's sovereign credit profile displays a number of strengths adding 'Real GDP growth will likely remain positive although Moody's expects it will slow to an average 2.6 per cent per year until 2018 down from a previously higher growth trend of 4.7 per cent on average between 2004 and 2013. Offsetting this strength to some degree is the likely sharp fall in nominal GDP this year from the collapse in oil prices.'
Moody's said its base case scenario for oil market trends is a Brent crude price of US$55 per barrel on average in 2015 that rises gradually to US$75 per barrel by 2018. 'Even factoring in the reduced government revenues and higher government debt over the next one to three years Oman's debt metrics will still compare favourably with the A-rated median' it said.
Oman's 2015 state budget is based on an average oil price assumption of US$75 per barrel. Oman crude price (spot) closed at US$57.59 per barrel on Friday on the Dubai Mercantile Exchange (DME).
Oman's total government assets grew from RO8bn in 2004 to RO24bn by end-2013 - equivalent to 80 per cent of GDP and around nine times outstanding government debt. In Moody's view this limits the risks from contingent liabilities crystallising on the government balance sheet.
It said Oman's strong liquid and stable banking system provides support for government funding and for private-sector economic activity and does not pose imminent contingent risks to the government.
Moody's said the driver for the change in outlook to 'negative' from 'stable' centres around uncertainty over the effectiveness of the government's policy response to challenges posed by lower oil prices to Oman's government finances external current account and growth performance in 2015 as well as over the next three years.
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