MUSCAT, JULY 18 - A sharp uptick in crude oil prices, coupled with ongoing fiscal consolidate efforts, has contributed to a significant reduction in Oman’s budget deficit over the first five months of 2018, according to the Central Bank of Oman (CBO). The deficit plummeted to RO 1.095 billion during the January-May 2018 period, down from RO 2.035 billion during the corresponding period of 2017, the apex bank stated in a newly published review of banking and monetary developments covering this timeframe. “The economic recovery in the Sultanate is gaining traction as domestic demand improves and market sentiment becomes more conducive to growth,” the CBO review noted. “Also, the sustained increase in oil prices coupled with strong external demand will give the non-oil activities the needed stimulus. The diversification policy continues to add more strength to sustainable economic growth.”
Oil prices averaged $63 per barrel during the first five months of 2018 versus an average of $51 per barrel for the corresponding period of 2017.
“The rise in oil prices reflected positively on current the account balance,” the Central Bank said, noting that inflationary conditions in Oman generally remained “benign” with the average annual inflation based on the Consumer Price Index (CPI) during January-May 2018 at 0.4 per cent.
Commenting on the performance of commercial banks, the regulator said the sector maintained its positive growth trajectory. “The banking sector in Oman continued to grow reasonably and met credit needs of all segments with special emphasis on the SME sector, supporting the economic activities including diversification initiatives,” it said.
The Central Bank, it pointed out, had issued a number of regulatory amendments to help bolster liquidity and credit with the goal of “stimulating the business environment to spur growth in the economy”.
Banking credit to the private sector rose 5.7 per cent to RO 21.5 billion at the end of May 2018, according to the report. The household segment accounted for 45.6 per cent of this figure, the non-financial corporate sector 46.0 per cent, while financial corporations and other sectors secured 4.8 per cent and 3.5 per cent respectively, of the total credit.
Deposits, on the other hands, climbed 3.6 per cent to RO 22.3 billion during the period under review. Private sector deposits grew 4.1 per cent to RO 14.3 billion. Households accounted for 49.1 per cent of total deposits, followed by non-financial corporations (29.2 per cent) and financial corporations (19.1 per cent).
Financing by Islamic banks and windows jumped to RO 3.3 billion this year, compared to RO 2.7 billion a year ago. Total deposits held with Islamic banks and windows surged 21 per cent to RO 3.2 billion in May 2018, up from RO 2.6 billion last year.
“The total assets of Islamic banks and windows combined amounted to RO 4 billion as at the end of May 2018, constituting about 12.5 per cent of the entire banking system assets,” the report added.