Mubasher: Moody's Investors Service has changed the future outlook for Oman's banking system to 'stable' from 'negative', according to Moody's report on Tuesday.
This outlook represents the rating agency's expectations over the performance of Omani banks in the coming 12-18 months, the report revealed.
Moody's expectations are justified by the thought that a level public spending will be backed by increased government borrowing and higher hydrocarbon output, which "will help stabilize the softened economy following a prolonged period of decline in oil prices," said Moody's.
"The Omani government will help cushion the economic impact of low oil prices by maintaining high levels of public spending despite its lower oil-related revenues," says Mik Kabeya, Analyst at Moody's. "The government's countercyclical spending policy will bolster the resilience of the banks' asset quality, profitability and capital metrics, while funding and liquidity will weaken moderately."
Oman's real GDP is likely to gradually slow down to 1.7% in 2016 and 2.0 in 2017 from 3.3% in 2015, Moody's highlighted, adding that credit growth will accordingly dawdle to an average of 7-9% over 2016/17, compared with 12% in 2015.
Problem loans, Moody's further expected, are to increase during the outlook period due to the tight economic stance that negatively affected corporate profits and
household finances.
"The rating agency forecasts problem loans to increase to around 3.0% of gross loans by end 2017, from a low 2.1% at June 2016", according to the report.
The Omani government will likely support the local banks to stay 'very high' in performance, the report concluded.
