Ratings agency Standard & Poor’s (S&P) has lowered Oman’s outlook from stable to negative in response to the fall in oil prices to below $70 a barrel.

However, the A/A-1 rating on long- and short-term foreign and local currency sovereign credit is unchanged, thanks to Oman’s strong net external and government asset positions, which are about 76 per cent of GDP.

Other agencies have not yet changed their ratings for Gulf countries, but S&P also downgraded the outlook for Saudi Arabia.

Oman has a breakeven price of $101.6 a barrel of oil, according to the Washington-based IMF; its fields are mature and expensive to develop, meaning it will be harder hit by continuing low oil prices than other Gulf states.

Oil accounts for nearly 50 per cent of Oman’s GDP, despite government efforts to diversify the economy.

“We now expect the traditional current account surplus, which was equivalent to over 10 per cent of GDP in 2012, to turn to a small deficit in 2017, equivalent to 0.2 per cent of GDP, as oil receipts drop and demand for imports of capital goods remains high,” said S&P. “The deterioration in the fiscal or external positions could be sharper than we currently expect, or growth in real GDP per capita could fail to accelerate.”

The agency predicts GDP growth of 3.6 per cent a year until 2017, slightly lower than previous estimates.

Muscat is expected to cut subsidies, defence spending and lower-priority projects.

S&P also raised concerns over a smooth succession to Sultan Qaboos, who has ruled Oman since 1970. He is currently receiving medical treatment in Germany and has no obvious successor.