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GCC banking outlook stable, underpinned by solid economic growth: Moody’s

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Outlook for banks in the Gulf Cooperation Council (GCC) remains stable and is underpinned by solid economic growth, said ratings agency Moody’s Investors Service in a presentation on Monday.

Moody’s also pointed to banks’ strong capital buffers – financial assets held in case of crisis – and substantial liquidity as additional supporting factors for the stable outlook.

“Government spending programs will push average non-hydrocarbon GDP growth to 2.6 percent in 2020, providing favorable operating conditions for the region’s banks,” said Nitish Bhojnagarwala, VP Senior Credit Officer at Moody’s.

“Declining interest rates will start to pressure banks’ net interest margins but margins will remain strong compared with global peers,” he added.

The ratings agency has an outlook of stable for all GCC banking systems expect Oman. Moody’s maintains a negative outlook on the country’s banking system, due to constrained government finances limiting the banks’ access to funding and liquidity in conjunction with lower oil prices slowing down government spending.