According to credit rating agency Moody’s, problem loans in Oman are expected to increase in the bracket of 3.2 percent to 3.7 percent during 2019 and 2020. As of June 2019, problem loans in Oman were about 2.8 percent of the total loans issued.
The increase in problem loans could be attributed to the underperforming construction sector in Oman.
The New York-based agency added that outlook for the Omani banking system remains negative as loan quality weakens and access to funding is limited.
With regard to increasing problem loans in Oman, Mik Kabeya, assistant vice president at Moody’s told the media that, “The challenging environment for businesses and households will lead to increased problem loans. Our negative outlook for the sector also takes account of the government’s declining capacity to support the country’s banks in case of need.”
Bank’s access to funds and liquidity is expected to be limited due to constrained government finances as a result of oil output cuts. Credit growth will remain stable at 6.5 percent through 2019 and 2020, according to Moody’s.
Despite the fact that Oman has access to financial markets and that it has issued bonds worth billions of dollars in July, its fiscal position remains weak.
Oman’s real GDP growth will remain subdued at 1.6 percent in 2019; however, it is expected to increase to 2.7 percent in 2020.
Recently, Oman has been amending its rules and regulations to ease the inflow of foreign investment into the country. According to the data released by the National Centre for Statistics and Information, foreign direct investment stood at OMR10.56 billion in 2018.