The ratings are supported by
Based on S&P's assumption that the oil price will decline to around
"We estimate per capita GDP at
"This reflects the boost to population growth from both the high birth rate in
In a resource-rich economy such as the Sultanate, growth in GDP per capita is to a considerable degree fuelled by commodity prices, particularly oil. "Given our expectations of a moderately weaker oil price over the forecast horizon and continued migrant inflows, we expect per capita GDP to remain largely flat in the coming years. A sharp decline in the oil price or significant revisions to the Sultanate of
Expansion in recurrent public spending since 2011 has contributed to a steep narrowing in the general government surplus from seven per cent of GDP in 2011 to around two per cent in 2013 (including transfers to reserve funds and investment income).
"We expect the surplus to continue to weaken to a broadly balanced position by 2017, assuming a lower oil price. Hydrocarbon revenues account for nearly 90 per cent of government revenues. We anticipate only marginal reductions in expenditure as close to 50 per cent of spending relates to public-sector wages and subsidies and exemptions. However, we view the government's large net asset position as providing a measure of fiscal flexibility, which the government could draw upon should it post even weaker fiscal outturns," noted the rating agency.
"Sizeable oil receipts in recent years have helped to maintain
"In our view, monetary policy is limited in
"The stable outlook balances our expectation that
"We could consider lowering the ratings if we were to assess
"We could consider an upgrade if the underpinnings of economic growth strengthen — raising per capita income levels — or if the monetary authorities allowed greater exchange rate flexibility."
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