Global rating agency Moody’s has changed the outlook for the banking sector in Oman to “positive” from “stable”, thanks to improving operating conditions and loan quality.

“We expect loan quality to improve, as economic growth will support borrowers’ repayment capacity,” Francesca Paolino, AVP Analyst, Moody’s, said.

Omani banks will continue to deliver steady profitability and retain solid capital buffers, she added.

The country’s non-oil growth is likely to be around 3% in 2025-2026, driven by strong business and consumer confidence, improvements in tourism and a pipeline of committed private sector investment projects in manufacturing, transportation and renewable energy.

However, over-reliance on government deposits remains a key risk for the banks, but deposit growth is likely to be in line with government and private-sector loan demand.

Omani banks hold sufficient liquid resources to cover their exposure to confidence-sensitive market funding, Paolino said.

The positive outlook on the banking system also considers the government’s improving capacity to support banks in a crisis, largely driven by a reduction in the Gulf state’s debt burden and improved debt affordability, she added.

(Editing by Brinda Darasha; brinda.darasha@lseg.com)