Oman’s banking sector remains resilient despite drop in GDP

MUSCAT: Banking sector regulations and reforms by the Central Bank of Oman CBO has resulted in a strong and resilient banking system over the year. Conduct of monetary policy, risk-based supervision of banks, implementation of Basel accords, development of modern payment and settlement systems and supporting growth with containment of inflation have led to financial stability. Credit growth to the productive sectors including SMEs continue to be encouraged by the CBO.
Given the present trend of low oil prices, both the fiscal situation and the current account in the balance of payments faced challenges and the authorities have taken several steps to address the issue. With the hydrocarbon sector still fundamental to the economy, the oil prices have impacted overall economic activity.
Preliminary national accounts data for the Sultanate shows that the nominal GDP declined by 11.1 per cent during the first half of 2016 compared to the same period last year. Nominal GDP derived from the petroleum sector contracted by 32.9 per cent and that from the non-petroleum sector registered a marginal decrease of 1.6 per cent.
The Omani crude oil registered an average price of $39.3 per barrel during January-November 2016 compared to $57.4 per barrel in the similar period 2015. Average annual inflation remained moderate at 1.12 per cent during January-November 2016.
On a point-to-point basis however, inflation stood at 1.85 per cent in November 2016 compared to its level in November 2015.
The banking sector remained resilient supporting the economic diversification initiatives and credit needs. The combined balance sheet of conventional and Islamic banks (other depository corporations) taken together, provides a complete overview of the financial intermediation taking place in the banking system in Oman. The total outstanding credit extended by other depository corporations stood at RO 21.9 billion as at the end of November 2016, a rise of 9.6 per cent over the level witnessed a year ago. Credit to the private sector increased by 11 per cent to RO 19.7 billion as at the end of November 2016. Of the total credit to the private sector, the household sector (mainly under personal loans) stood at 46.4 per cent closely followed by the non-financial corporate sector at 45.4 per cent, financial corporations at 5.1 per cent and other sectors the remaining 3.1 per cent.
Total deposits registered a growth of 4.5 per cent to RO 20.3 billion as at the end of November 2016.
Private sector deposits of the banking system registered a growth of 5.6 per cent to RO 13.1 billion as at the end of November 2016.
Sector wise, the share of households was 48.7 per cent of the total private sector deposit base, followed by non-financial corporations at 28.3 per cent, financial corporations at 19.8 per cent and the other sectors at 3.2 per cent. — ONA