Oman's credit rating was reduced by two levels to A3 and placed on review for a further downgrade. It's Moody's first downgrade of the nation since issuing its initial rating in 1999. That puts it on par with Mexico and Malaysia.

Moody's said its review of Oman for another cut reflects 'uncertainty over the pace and effectiveness of the government's policy response to challenges".

The decision is the latest in a series of ratings cuts that has hit Gulf Cooperation Council members which collectively produce about a quarter of the world's oil as crude prices struggle to rebound from the lowest levels in 12 years.

The country was downgraded this month by Standard and Poor's to the lowest investment-grade raking. The International Monetary Fund projected the Oman's budget deficit would spike to almost 18 per cent for the year that ended in December second only to Saudi Arabia also coming off a fresh rating cut by S&P.

The oil price slump 'has left Oman with a weaker credit profile than it had prior to the shock' Moody's said. 'Furthermore Oman has a comparatively weaker asset cushion with government financial assets amounting to only about three years of spending.'

The Omani government is expected to drain its stock of financial assets to around 55 per cent of gross domestic product by 2018 from an estimated 85 per cent in 2015 using the assets to backstop budget shortfalls the ratings company said.

Oman's GDP per person was estimated by the International Monetary Fund at less than US$17000 in 2015 about a third less than the next-best Saudi Arabia. The government's spending adjustments will probably slow growth to an average of about two per cent per year until 2018 from the 4.5 per cent expansion rate between 2010 and 2014 according to Moody's.

Bloomberg