Moody’s Revises Oman’s Banking Sector Outlook to Stable: What This Means for Investors and Business Growth
By Conrad Prabhu
Muscat: The leading international ratings agency Moody’s has revised the outlook for Oman’s banking sector from positive to stable, maintaining the sector’s Baa3 rating. This adjustment reflects expectations that non-oil GDP growth will hover around 3.5% in 2026, supporting sustained loan growth.
Economic activity is expected to be fueled by strong sentiment, expansion in tourism, and ongoing projects across manufacturing, transportation, and renewable energy sectors, aligned with Oman’s national economic diversification strategy.
Moody’s highlighted that loan quality is likely to continue improving as economic growth enhances borrowers’ ability to repay. Omani banks are projected to maintain healthy profitability and solid capital buffers. While overreliance on government deposits remains a key risk, deposit growth is anticipated to keep pace with loan demand from both government and private sectors. The agency also noted that banks hold sufficient liquid assets to offset exposure to less stable funding sources. The stable outlook also factors in the government’s capacity to support the banking sector in times of crisis.
Higher oil production is forecasted to boost Oman’s overall real GDP growth to 3.7% in 2026, compared to an estimated 2.6% in 2025. This economic improvement will drive credit demand and help diversify banks’ loan portfolios beyond the oil sector. Moody’s expects a decline in Stage 2 loans and stable levels of Stage 3 loans relative to total lending, supported by borrowers’ improved repayment capacity. High provisioning coverage, at 129% of problem loans, offers a strong buffer against potential losses.
Domestic credit demand is projected to align with deposit growth, while liquidity buffers remain robust enough to cover sensitive market funding. The agency also commended the authorities’ strong willingness and capacity to back banks, reinforced by a reduced national debt burden and improved debt affordability.
This stable outlook signals continued resilience and balanced growth prospects for Oman’s banking sector amid evolving economic conditions.
Special Analysis by Omanet | Navigate Oman’s Market
Moody’s stable outlook for Oman’s banking sector signals steady economic growth driven by diversification and strong non-oil GDP expansion, presenting a lucrative opportunity for investors focused on tourism, manufacturing, and renewable energy sectors. However, banks’ heavy reliance on government deposits remains a risk, so smart investors should carefully monitor liquidity dynamics and government fiscal health to capitalize on sustainable credit growth.
