Omani ‘cushion’ improves outlook for its banks

Omani rialsOman’s commitment to maintain public spending in the face of low oil prices improves the outlook for the country’s banks, says a major rating agency.

Funded by borrowing, Oman’s government can help limit the slowdown in economic growth and protect the creditworthiness of its banking sector, said Moody’s in a report. The agency has raised its outlook for the Omani bank sector from negative to stable.

“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, an analyst at Moody’s.

The agency predicts GDP growth in Oman to fall to 1.7% this year, a decline from more than 3% in 2015. It predicts a slight increase in growth to 2% in 2017.

“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,” said Kabeya.

©2016 funds global mena

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