S&P Affirms Oman's Credit Rating at 'BBB-' with Stable Outlook

Standard & Poor's (S&P) affirmed Oman's long-term sovereign credit rating at 'BBB-' and its short-term rating at 'A-3', maintaining a stable outlook for the nation. The ratings agency stated that sound fiscal and current account balances are expected to support the Omani government’s debt and external positions through 2029. This affirmation shows S&P's positive assessment of the Sultanate's financial resilience and economic management strategies. The stable outlook reflects the agency's view that Oman's creditworthiness is unlikely to change over the next 12 to 18 months, based on current economic trends and policy implementation.

S&P noted that Oman’s fiscal and external metrics are benefiting from the rise in hydrocarbon prices, increased oil output, and supply-chain relocation. The agency anticipates Oman will maintain its currency peg, supported by accumulated government external assets, which stand at approximately 35% of GDP. S&P stated, "Oman’s fiscal and external metrics are benefiting from the rise in hydrocarbon prices, oil output, and supply-chain relocation." This positive trend is a key factor in the stable rating. It added, "Deveraging initiatives have helped reduce fiscal risks tied to government-related entities. We expect Oman will maintain its currency peg, supported by its accumulated government external assets of about 35% of GDP." The stability provided by these external assets is key for investor confidence.

Economic Strengths and Projections

Oman's fiscal and external buffers include liquid government assets exceeding 40% of its GDP. The nation also maintains gross foreign currency reserves close to 20% of GDP, providing an additional layer of financial security against external shocks. These strong reserves are a testament to the government's prudent financial management. Standard & Poor's (S&P) has revised its forecast for Oman's real GDP growth, anticipating an acceleration to 3.5% in 2026, an increase from its previous projection of 2.3% for 2025. This upward revision notes the agency's optimism regarding Oman's economic trajectory. The improved growth outlook is supported by ongoing diversification efforts and a favorable external environment.

S&P forecasts that the Omani government will achieve a fiscal surplus of 4.8% of GDP in 2026. This is expected to be followed by a surplus of 2.2% of GDP in 2027, based on an assumption of Brent oil prices averaging $80 per barrel. The fiscal position is then projected to be nearly balanced over the 2028-2029 period, indicating a sustainable long-term financial outlook for the country. These projections reflect the government's commitment to fiscal discipline and revenue diversification, reducing reliance on volatile oil prices. The anticipated surpluses will allow for further investment in key development projects and strengthening of national reserves.

For its 2026 base-case scenario, S&P expects Brent oil prices to average $95 per barrel for the remainder of the year. This favorable price environment contributes significantly to Oman's revenue generation. The agency also projects that oil production will increase to 1.1 million barrels per day (mbpd) in 2026, further bolstering the nation's economic output. Hydrocarbons are a significant contributor to Oman's economy, accounting for 30% of the nation's GDP. Additionally, hydrocarbons make up 50% of Oman’s goods exports and contribute 70% of the government's revenue. This sector remains a cornerstone of the Omani economy, even as the nation actively pursues diversification strategies. The sustained performance of the hydrocarbon sector provides a stable foundation for the country's economic reforms.

Structural Reforms and Diversification Efforts

Over the past five years, Oman has demonstrated a proactive commitment to addressing structural challenges. Total investment in the 10th development plan, spanning 2021 to 2025, reached 25.5% of GDP, falling slightly below the targeted 26.5% of GDP. Despite this marginal difference, the investment levels indicate significant progress towards national development goals. Non-oil sector growth during this period significantly exceeded expectations, reaching 3.9% against a goal of 3.2%. This outperformance notes the success of the government's diversification initiatives. The 2025 expansion of the golden visa programme is set to further support growth within the non-oil sector by attracting foreign investment and talent. This program is expected to stimulate various non-oil industries, including tourism, logistics, and manufacturing.

The launch of the Oman International Financial Centre (OIFC) is expected to catalyse investment, positioning Oman as a regional financial hub. Standard & Poor's anticipates Oman will continue to focus on activating capital market depth in its upcoming 11th development plan, scheduled for 2026 to 2030. This strategic focus aims to enhance liquidity and attract both domestic and international investors. The Muscat Stock Exchange currently holds a market capitalisation equivalent to approximately 37% of GDP, showing the potential for further development and expansion within the nation's financial markets. Initiatives to deepen capital markets are key for funding future economic growth and diversification.

Oman also aims to become a top exporter of liquid ammonia and hydrogen by 2030, reflecting its push towards green energy and sustainable economic practices. Renewable energy sources represented about 10% of Oman's total power generation in 2021, marking a foundational step in its energy transition. The nation's annual renewable production stood at 50 megawatts in 2021, and expanded significantly to over 1,600 megawatts by 2025, showing its commitment to energy diversification and reducing its carbon footprint. This rapid growth in renewable energy capacity is a key component of Oman's long-term economic and environmental strategy.

Sectoral Growth and Future Initiatives

Cargo volumes at the ports of Salalah increased by approximately 15% in the first half of 2026, demonstrating strong activity in the logistics sector. During the same period, the ports of Sohar experienced a substantial rise in cargo volumes, growing by approximately 52%. This significant increase notes the growing importance of Sohar as a regional trade gateway. Ship-to-ship operations contributed significantly to Sohar's performance, accounting for half of its cargo volume in the first half of 2026, indicating its strategic role in maritime logistics. These figures show the strength and growth potential of Oman's logistics and shipping industries, which are key pillars of its economic diversification plans.

The Omani government has announced a net-zero emissions target date of 2050, signaling a profound commitment to environmental sustainability and climate action. This ambitious initiative is supported by ongoing renewable energy projects and policies aimed at decarbonizing various sectors of the economy. The Ibri II solar project, for instance, has a 500-megawatt output, contributing significantly to the nation's clean energy goals and demonstrating its capacity for large-scale renewable energy generation. Additionally, the two Manah solar plants collectively generate a combined output of 1,000 megawatts, further solidifying Oman's position in solar power. Further diversifying Oman's energy mix, the Dhofar Wind Farm Phase 1 provides about 50 megawatts of capacity to the national grid, showcasing the country's multi-faceted approach to renewable energy development. These projects are integral to achieving the net-zero target and fostering a green economy.