RIYADH: Fitch Ratings has revised Oman’s long-term foreign currency issuer default ratings to positive from stable and affirmed the IDR at BB+, driven by the availability of fiscal tools to combat future shocks. 

According to its latest report, the US-based credit rating agency said that the Gulf country’s ratings were supported by higher gross domestic product per capita, the positive impact of recent budget reforms and decreasing government debt per GDP. 

While Fitch maintains a positive outlook on Oman, its IDR remains lower than that of its regional neighbors, including Saudi Arabia and the UAE. In February, Fitch affirmed the Kingdom’s IDR at A+ with a stable outlook, while the UAE received an AA- rating.

According to the rating agency, a BB rating indicates an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time. However, it also suggests that the company or entity has some financial flexibility to meet its obligations despite the increased risk.

“High dependence on oil revenue, modest financial buffers given high exposure to volatile hydrocarbon prices, and Oman’s net external debtor position weigh on the ratings,” said Fitch. 

Saudi Arabia’s A+ rating indicates the Kingdom’s strong capacity to pay financial commitments and signifies low default risk. 

The analysis added that Oman’s positive outlook also reflects greater confidence in the resilience of public finances and the availability of more fiscal tools to respond to shocks than in the past.

The US-based agency said the Gulf country’s overall GDP is expected to expand by 1.8 percent in 2024, driven by the growth of the non-oil economy. 

“We project overall GDP growth of 1.8 percent in 2024, after 1.2 percent in 2023, supported by non-oil growth of 3.7 percent, while hydrocarbon GDP was hindered by OPEC+ quotas. Domestic consumption, robust foreign investment and tourism will maintain non-oil growth above 3 percent in 2025 and 2026,” added Fitch. 

The analysis added that Oman’s budget surplus is expected to narrow to 0.7 percent of GDP in 2025 and to turn into a minor deficit of 0.2 percent in 2026, assuming that the average price of Brent oil will reach $70 per barrel next year, and $65 per barrel in 2026. 

In November, Moody’s also upgraded Saudi Arabia’s long-term local and foreign currency issuer and senior unsecured ratings to Aa3 from A1. 

Moody’s gives Aa3 ratings to countries with very low credit risk and the best ability to repay short-term debt. 

Fitch downgrades Egypt’s economic growth prospects

In a separate report, Fitch Ratings downgraded Egypt’s economic growth outlook to 3.7 percent for the fiscal year 2024/2025, down from a previous projection of 4.2 percent, driven by disruptions in the Suez Canal. 

The US-based agency added that Egypt’s economy is expected to accelerate to 5.1 percent in 2025/26, up from its previous forecast of 4.7 percent. 

Fitch said that this expected economic growth is driven by the possible normalization of Red Sea navigation and a stronger performance of the services sector due to easing geopolitical risks.

In November, speaking at the Rome MED-Mediterranean Dialogues conference, Egypt’s Minister of Foreign Affairs Badr Abdelatty said that the country had incurred losses amounting to $8 billion due to a significant drop in the Suez Canal revenues. 

The analysis added that the country’s economy is recovering; however, the pace is slower than previously projected. 

In October, the International Monetary Fund said that Egypt’s economy is set to expand by 2.7 percent in the current fiscal year before accelerating to 4.1 percent next year. 

Earlier this month, another report by Fitch Ratings said that general business and operating conditions for financial institutions in Egypt are expected to improve next year. 

In that report, Fitch said that improved investor confidence and healthy foreign currency liquidity conditions are some of the major factors that could strengthen the banking sector in Egypt in 2025. 

LONDON: Oil prices fell in Asian trade on Thursday after the US Federal Reserve signaled it would slow the pace of interest rate cuts in 2025, which could slow economic growth and reduce fuel demand.

Brent futures fell 47 cents, or 0.6 percent, to $72.92 a barrel by 8:15 a.m. Saudi Time. US West Texas Intermediate crude fell 39 cents, or 0.6 percent, to $70.19.

The declines reversed most of the benchmark contracts’ gains from Wednesday when prices settled higher as US crude stocks fell and the US Federal Reserve cut interest rates by 25 basis points as expected.

Prices weakened after US central bankers issued projections calling for two quarter-point interest rate cuts in 2025 on concerns about rising inflation. That was half a point less than they had anticipated as of September.

Lower rates decrease borrowing costs, which can boost economic growth and demand for oil.

“The demand-supply balance going into 2025 continues to look unfavorable and predictions of more than 1.0 million bpd demand growth in 2025 look stretched in our opinion. Even if OPEC+ continues to withhold production, the market may still be in surplus,” DBS Bank’s energy sector team lead Suvro Sarkar said.

Meanwhile, although demand in the first half of December rose year-on-year, volumes remained lower than expected by some analysts.

JP Morgan analysts said in a note that global oil demand growth for December so far was 700,000 barrels per day less than it had expected, and for the year-to-date, global demand had risen by 200,000 bpd less than it had forecast in November 2023.

Official data from the Energy Information Administration on Wednesday showed US crude stocks fell by 934,000 barrels in the week to Dec. 13, compared with analysts’ expectations in a Reuters poll for a 1.6 million-barrel draw.

While the drawdown was less than expected, the market found support in the data as US crude exports rose by 1.8 million bpd last week to 4.89 million bpd.