S&P affirms Oman at BBB-, raises 2026 growth forecast to 3.5% 

RIYADH: S&P Global Ratings affirmed Oman’s long-term sovereign credit rating at “BBB-” and its short-term rating at “A-3”, with a stable outlook, while raising its 2026 economic growth forecast for the sultanate to 3.5 percent.

The agency had previously forecast growth of 1.6 percent. The revision reflects higher oil and gas production and Oman’s ability to maintain energy exports through ports with direct access to the Arabian Sea, reducing its reliance on the Strait of Hormuz.

Economic growth is expected to moderate to an average of about 2.4 percent annually between 2027 and 2029, S&P said.

“The stable outlook reflects our opinion that Oman’s fiscal and external buffers — which include liquid government assets in excess of 40 percent of GDP (gross domestic product) and gross foreign currency reserves of close to 20 percent of GDP — will support the sovereign against adverse geopolitical developments, except under a scenario of a prolonged escalation of attacks by Iran on Oman’s energy and civilian infrastructure,” S&P said.

The agency cautioned that this resilience could be tested under a scenario involving a prolonged escalation of attacks on Oman’s energy and civilian infrastructure.

Fiscal position

S&P forecasts that Oman will record a fiscal surplus equivalent to 4.8 percent of GDP in 2026, followed by a surplus of around 2.2 percent in 2027.

The agency projects the public debt-to-GDP ratio at 30.2 percent by the end of 2026 and expects the government to maintain a positive net asset position over the medium term.

Oman’s current account surplus is forecast at about 3.5 percent of GDP in 2026 before narrowing to 1.8 percent by 2029. Foreign exchange reserves stood at approximately $19.5 billion at the end of June.

S&P said Oman had made progress over the past five years in addressing structural fiscal and external imbalances, supported by stronger coordination of public finance reforms and improvements in governance.

The agency also cited the government’s publication of quarterly GDP and fiscal data and annual international investment position data, as well as its participation in the International Monetary Fund’s Article IV consultation process.

Oman nevertheless remains exposed to oil-market movements. Hydrocarbons account for about 30 percent of GDP, half of merchandise exports and 70 percent of government revenue, making energy prices and uninterrupted export flows central to the fiscal outlook.

Growth and diversification

S&P expects Oman’s oil production to reach about 1.1 million barrels per day in 2026, up from approximately 1.03 million bpd in 2025, before rising toward 1.2 million bpd between 2027 and 2029.

Non-oil activity expanded by about 1.3 percent year on year during the first half of 2026, supported by trade, logistics, information technology and financial services.

Cargo volumes at the ports of Salalah and Sohar increased by 15 percent and 52 percent, respectively, during the period, according to the ratings report.

The IMF’s April regional outlook also projected Oman’s economy to grow by 3.5 percent in 2026, providing independent support for S&P’s revised estimate.

Oman now holds investment-grade ratings with stable outlooks from all three major rating agencies. S&P, which restored the country’s investment-grade status in September 2024, reaffirmed its “BBB-/A-3” ratings in September.

Moody’s latest public sovereign action remains its July 2025 upgrade of Oman’s long-term issuer and senior unsecured ratings to “Baa3” from “Ba1”, with a stable outlook. Fitch’s latest action remains its December 2025 upgrade of the country’s long-term foreign- and local-currency issuer default ratings to “BBB-” from “BB+”, also with a stable outlook.

S&P said further improvements would depend on continued fiscal and economic reforms, sustained non-oil growth and progress in developing Oman’s domestic capital markets. A weakening of reform momentum or a significant deterioration in fiscal and external balances could place pressure on the rating.

Source – Arab News