Economy on growth path despite oil price downslide
MUSCAT: Despite lower oil prices in the second half of 2014, the macroeconomic situation in the Sultanate remained favourable, the Central Bank of Oman (CBO) has said in its Annual Report.
The major drivers of growth were higher sustained domestic demand, mainly supported by large public expenditure and accommodative monetary policy.
Following a negative growth in 2009 due to fallout of the global financial crisis, the average growth rate of Gross Domestic Product (GDP) at current prices between 2010 and 2012 was around 16.5 per cent.
In 2013, the GDP at current prices grew at a modest pace of 2.4 per cent primarily due to weaker crude oil prices in the global market and in 2014 as the economic momentum picked up slightly the nominal GDP grew by 4.6 per cent.
While the petroleum sector nominal GDP declined by 2.4 per cent, the non-hydrocarbon nominal GDP grew by 10.1 per cent during 2014. As a result, the share of petroleum activities in the overall GDP at current market prices declined to 47.2 per cent in 2014 from 50.6 per cent in 2013.
Within the non-petroleum industrial activities, manufacturing sector recorded a modest growth of 0.4 per cent in 2014 while electricity and water supply, building and construction grew by 8.6 per cent and 8.3 per cent respectively.
Services sector grows 13%
The services sector grew by 13.1 per cent in 2014 as compared to 9.2 per cent in the previous year. The share of services sector in GDP increased to 40.7 per cent in 2014 from 37.3 per cent in 2013.
The Government has been taking several initiatives to create employment in public and private sectors that include aligning some of the benefits between the two sectors, so as to make private sector jobs more attractive to nationals. Employment opportunities created in the public sector during the five-year period 2009 to 2013 increased by an average rate of 6.6 per cent. During 2013, the employment in the public sector increased by 8.6 per cent as compared to 5.4 per cent in the previous year.
During the five-year period 2010 to 2014, average employment growth in the private sector was 12.7 per cent. However, during 2014, the growth in employment in the private sector slowed down to 3.4 per cent as compared to 14.8 per cent in the previous year.
Omanisation gains
The decline in employment within the private sector was mainly due to sharp fall in the growth rate of employment of expatriates in this sector from 16.0 per cent in 2013 to 2.8 per cent in 2014.
On the other hand, the growth in employment of Omanis in the private sector stood at 8.6 per cent during 2014 as compared to 5.7 per cent in the previous year, pointing to the potential of the private sector to employ more nationals.
While the growth momentum has been sustained, inflation was also fairly contained in the Sultanate with the average inflation based on CPI for the Sultanate being lower at 3.4 per cent during the three-year period 2010 to 2012. The year 2014 continued to witness low inflation with the average inflation registering an increase of only 1.1 per cent.
In 2014, the average inflation based on CPI for the Sultanate stood slightly lower at 1.0 per cent. The CBO and the Government have been keeping a close watch on the price situation. There have been efforts towards increasing market awareness of consumers, proper monitoring of supply situations and diversifying imports.
Inflation
The recent moderate rise in prices owed to both demand and supply side factors originating from the domestic, as well as external sources. Lower international food and metal prices helped in keeping the inflation low as bulk of food items were imported.
Though the overall inflation remained low, the contribution of the three groups “Foods and nonalcoholic beverages,” Housing, water, electricity, gas and other fuels,” and “Furnishing, household equipment and routing housing maintenance” to overall inflation were high during 2014.
Omani crude oil fetched an average price of $98.7 per barrel between 2010 and 2013. During the same period, oil production rose by an average of 3.8 per cent while oil exports rose by an average rate of 5.9 per cent. The Omani crude oil prices averaged $103.2 per barrel during 2014 as compared to $105.5 a barrel in 2013.–