Dip in oil prices pulls down nominal GDP in Q1

Oman’s nominal Gross Domestic Product (GDP), after growing at an accelerated pace of 12 per cent during 2018, declined by 1.6 per cent during the first quarter of 2019, according to the Central Bank of Oman (CBO).
The slowdown was pervasive across hydrocarbon and non-hydrocarbon activities, which experienced a nominal contraction of 0.5 per cent each during Q1 of 2019 as compared to a nominal growth of 20.9 per cent and 3.4 per cent, respectively, during Q1 of 2018, the apex bank stated in its newly published Review of Banking and Monetary Developments for August 2019.
It attributed the decline in the nominal GDP emanating from the hydrocarbon sector to a dip in oil prices. Average oil prices declined by about 3 per cent to $ 61.0 a barrel in Q1 of 2019 from $62.9 per barrel during the same period of 2018, while the daily oil production inched up marginally by 0.4 per cent to 970.5 thousand barrel in Q1 of 2019.
On the other hand, nonpetroleum industrial activities that recorded a considerable drop in its nominal GDP mainly led to the contraction in non-hydrocarbon economic activities during this period, according to the report.
“Inflationary conditions, however, continued to remain benign as the retail inflation averaged 0.3 per cent during January-August 2019 in comparison with 0.8 per cent during the same period of last year,” the Central Bank said.
Reviewing the combined balance sheet of conventional banks and Islamic banking entities (other depository corporations), the CBO noted that the total outstanding credit extended by other depository corporations (ODCs) increased year-on-year (YoY) by 4.3 per cent to RO 25.8 billion at the end of August 2019.
The credit to private sector grew YoY by 3.3 per cent to RO 22.6 billion during this period. The non-financial corporate sector received highest at 46 per cent of the private sector credit, followed by household sector (mainly under personal loans) with 45.3 per cent, financial corporations with 5.3 per cent and other sectors with 3.4 per cent.
Total deposits held with ODCs increased by 3.4 per cent to RO 23 billion, with private sector deposits witnessing a growth of 5.6 per cent to RO 14.9 billion at the end of August 2019.
The households accounted for 49.7 per cent of total private sector deposits, while nonfinancial corporations, financial corporations, and other sectors accounted for 29.9 per cent, 18 per cent and 2.4 per cent, respectively. The credit extended by conventional banks increased YoY by 2.9 per cent as of end-August 2019, with credit to the private sector growing by 1.2 per cent to RO 18.9 billion. Conventional banks’ total investments in securities increased YoY considerably by 12.6 per cent to RO 3.4 billion at the end of August 2019.
Investment in Government Treasury Bills stood at RO 245.3 million. Aggregate deposits of conventional banks increased by 2.4 per cent to RO 19.6 billion at the end of August 2019 from RO 19.1 billion a year ago. Government deposits increased YoY by 3.5 per cent to RO 5.4 billion, while deposits of public enterprises decreased YoY by 7.5 per cent to RO 1 billion during the period under review.
Private sector deposits increased YoY by 2.8 per cent to RO 12.8 billion and constituted 65.4 per cent of total deposits with conventional banks.
The core capital and reserves of conventional banks stood at RO 4.9 billion as of end-August 2019.
The financing by Islamic banking entities continued to expand and stood at RO 3.9 billion at the end of August 2019, higher than RO 3.4 billion a year ago.
Total deposits held with Islamic banks and windows also increased to RO 3.4 billion from RO 3.1 billion a year ago. The total assets of Islamic banks and Windows combined amounted to RO 4.7 billion and constituted about 13.6 per cent of the banking system assets at the end of August 2019.
With regard to monetary aggregates, the narrow money (M1) decreased marginally by 0.4 to RO 5.2 billion at the end of August 2019, while quasi money (Omani Rial saving and time deposits, certificates of deposit issued by banks, margin deposits and foreign currency denominated deposits) increased YoY by 6.6 per cent to RO 12.1 billion during this period.
Broad money supply M2 (M1 plus quasi-money) grew YoY by 4.5 per cent to RO 17.3 billion during the period under review over the level a year ago.