Moody's on Tuesday revised its outlook for Oman's banking system to 'stable' from 'negative'. The global ratings agency said the stable outlook reflects its expectation that Omani banks' credit profiles will remain broadly stable over the outlook horizon, as increased government borrowing and higher hydrocarbon output will support a level of public spending that will help stabilise the softened economy. Moody's expects the sultanate’s real GDP growth to slow gradually to 1.7 % in 2016 and 2% in 2017, from 3.3 % in 2015. Subsequently, credit growth will decelerate to an average of seven to 9% over 2016-17, from 12 % in 2015. It forecasts problem loans in Oman's banking system to increase to around three % of gross loans by end of 2017, from a low 2.1 % at June 2016. Capital buffers will remain stable, providing the banks with strong loan loss absorbency, it added. Moody's noted Omani banks’ profitability will also remain healthy despite a marginal decline, with Moody's forecasting net interest margins to decline marginally to 2.2 % to 2.4 % over the outlook horizon, affected by increasing funding costs. (Muscat Daily)