Moody’s revises Oman’s banking sector outlook to stable

CONRAD PRABHU

MUSCAT: Leading international ratings agency Moody’s has revised the outlook for Oman’s banking sector (Baa3 stable) to stable from positive, citing expectations that non-oil GDP growth will remain around 3.5% in 2026, which is expected to sustain loan growth.

Economic activity is anticipated to be driven by robust sentiment, growth in tourism, and a pipeline of projects in manufacturing, transportation, and renewable energy as part of Oman’s national economic diversification plan.

“We expect loan quality to continue improving as economic growth supports borrowers’ repayment capacity, while Omani banks maintain good profitability and solid capital buffers. Overreliance on government deposits remains a key risk, but deposit growth is likely to align with government and private-sector loan demand,” Moody’s said on Wednesday. “Omani banks hold sufficient liquid resources to cover exposure to less stable funds. Our stable outlook also reflects the government’s capacity to support banks in a crisis,” the agency added.

Higher oil production is expected to lift Oman’s overall real GDP growth to 3.7% in 2026, up from an estimated 2.6% in 2025, while expansion of the non-oil economy will drive credit demand and support greater diversification of banks’ loan portfolios. Stage 2 loans are expected to decline, and Stage 3 loans remain broadly stable as a share of total lending, supported by borrowers’ improving repayment capacity. High provisioning coverage, at 129% of problem loans, provides a buffer against potential losses.

Domestic credit demand is projected to broadly match deposit growth, and liquidity buffers remain strong, sufficient to cover confidence-sensitive market funding. Authorities’ willingness and capacity to support banks are robust, strengthened by a reduction in Oman’s debt burden and improved debt affordability, ratings agency noted.