MUSCAT: The economic and health impact of the COVID-19 pandemic continued to influence policymaking during the year, the Central Bank of Oman said in its Financial Stability Report (FSR).

Tahir Salim Abdullah Al Amri, Executive President of CBO said the country’s economy and financial system weathered the pandemic quite well, and the majority of the market participants showed confidence in the Omani financial system.

According to Al Amri, in 2020, Oman’s real GDP contracted less than what was expected during the early phase of the pandemic, and the large-scale vaccination drive has significantly improved the outlook.

“Nevertheless, uncertainty remains elevated with a range of risks that could arise from the future course of the pandemic, resumption of trade tensions, and geopolitical developments,” he said.

“The vulnerabilities arising from household debt remained modest. At the aggregate level, household savings increased while their net debt (loans minus deposits) to the banking sector declined during 2020. However, the pandemic has a dissimilar impact on different segments, which may deepen the disparities. CBO will therefore continue to work on financial inclusion to support the government’s efforts aiming at inclusive growth. Financial leverage in the corporate sector in Oman is relatively low,” he noted.

Al Amri said on the way to normalcy, businesses affected during COVID-19 crisis will have an uphill task towards recovery. “On the way to normalcy, those affected businesses that are also highly leveraged will have an uphill task towards recovery,” he said.

Banks’ profitability came under some pressure due to an increase in provisions. However, despite a rise in delinquencies, asset quality indicators continued to be strong. Some uncertainty remains for banks’ credit quality once the support measures are lifted.

“Nevertheless, banks’ capital position improved during 2020, and stress tests showed that banks are resilient to severe shocks,” he added.