S&P cuts Saudi, Oman outlook on falling oil prices

07 Dec 2014

(MENAFN) Standard and Poor’s (S&P) said that it has lowered the outlook for the Saudi Arabia, the world’s top oil exporter to stable from positive as well as Oman to negative as the result of the continuous decline of oil prices, Gulf Daily News reported.

In regards to Saudi Arabia, the rating agency said that low oil prices is expected to put some pressure on the kingdom’s gross domestic product (GDP) and income, which was already reduced for the 2014-2017 period to USD23.400 compared with USD25.600 in June.

Despite Saudi building a strong fiscal reserves of around USD750 billion from surpluses from high oil revenues, the country has also been raising its public spending, particularly on several infrastructure projects, which might affect the country’s economy as its hydrocarbons sector contributes about 45 percent of its GDP.

For non-OPEC member Oman, S&P said the negative outlook was based on the decline of the country’ fiscal position, which could be sharper than currently expected if the oil prices continued plummeting to lower levels or if the decline persisted for a long time.

“The ratings are constrained by our view that the quality of Oman’s public institutions and governance is moderate, that high fiscal, external and economic dependence on volatile hydrocarbons receipts will persist, and that monetary policy flexibility is limited by the US dollar pegged exchange rate,” S&P said in its report.