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 nonhydrocarbon 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 nonfinancial 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.

CBO NOTED THAT THE TOTAL OUTSTANDING CREDIT EXTENDED BY OTHER DEPOSITORY CORPORATIONS (ODCS) INCREASED YEAR-ONYEAR (YOY) BY 4.3 PER CENT TO RO 25.8 BILLION AT THE END OF AUGUST 2019