Oman’s economy slows on low oil prices

Business Saturday 01/October/2016 14:24 PM
By: Times News Service
Oman’s economy slows on low oil prices

Muscat: With the sustained drop in crude oil prices, there was a slowdown in the economy in 2015 as well as in the first few months of 2016, according to the monthly bulletin released by the Central Bank of Oman (CBO).
Preliminary national accounts data for Oman pointed to a 12.2 per cent decline in the first quarter of the year in comparison to the first quarter of the previous year. Nominal gross domestic product (GDP) derived from the petroleum sector contracted by 34 per cent and that from the non-petroleum sector registered a decrease of 2.4 per cent.
Omani crude oil fetched an average price of $35 per barrel during the first half of 2016 compared to $59.3 per barrel during the first half of 2015.
On the fiscal front, the Government of Oman introduced several positive reform measures supported by external borrowings, in addition to other sources of funding to tackle the fiscal deficits. With oil prices continuing to remain low, the current account, which registered a deficit in 2015 is expected to be in deficit mode in 2016 too.
With inflation based on the average annual consumer price index (CPI) remaining low at 0.8 per cent during the period January — July 2016, the CBO continued with its accommodative monetary policy stance and made revisions to the reserve requirement leaving more money in the hands of banks to facilitate lending requirements.
The CBO has been continuously reviewing the liquidity situation and no significant pressures have been noticed in the banking system.
The banking sector remained resilient supporting economic diversification initiatives and credit needs. The total assets of conventional commercial banks increased by 4.2 per cent to OMR29.3 billion in July 2016 from OMR28.1 billion a year ago. Of the total assets, credit disbursement accounted for 66.2 per cent and increased by 8.3 per cent at the end July 2016 to OMR19.4 billion.
Credit to the private sector increased by 10 per cent to reach OMR17.2 billion at the end of July 2016. Conventional banks' overall investments in securities stood at OMR2.6 billion at the end of July 2016. Investment in Government Development Bonds and Government Sukuk increased by 56.4 per cent over the year to OMR922.6 million at the end of July 2016.
Banks also invested OMR398 million in Government Treasury Bills at the end of July 2016. Conventional banks' investments in foreign securities stood at OMR711.3 million in July 2016.
Aggregate deposits held with conventional banks registered a modest rise of 0.5 per cent to OMR18.4 billion in July 2016 from OMR18.3 billion a year ago.
Government deposits with conventional banks declined by 10.3 per cent to OMR4.8 billion. Deposits of public enterprises increased by 13.1 per cent to OMR1.2 billion during the same period. Private sector deposits, which constituted 65.9 per cent of total deposits with conventional banks, increased by 3.9 per cent to OMR12.2 billion in July 2016 from OMR11.7 billion a year ago. The core capital and reserves of conventional banks stood at OMR3.7 billion at the end of the July 2016, a rise of 12.2 per cent over the previous year.
Islamic banking entities provided financing to the extent of OMR2.1 billion at the end of July 2016 when compared to OMR1.4 billion a year ago. Total deposits held with Islamic banks and windows registered a significant increase to OMR1.9 billion in July 2016 from OMR1.2 billion outstanding at the end of July 2015.
The total assets of Islamic banks and windows combined, amounted to OMR2.7 billion at the end of July 2016 which constituted about 8.5 per cent of the banking system assets.