CBO Releases Mid-Year Review of Omani Economy for 2016
Central Bank of Oman has come out with its Mid-Year Review of the Omani Economy for 2016 covering recent macroeconomic developments in the Sultanate. The latest release indicated that with oil prices continuing to remain relatively low in 2016, economic activity in the Sultanate is projected to be subdued despite sustained expansion in hydrocarbon output.
The Review further indicated that the inflation in the Sultanate registered a modest rise in January-September 2016 due to revision in energy prices, user fees and turnaround in global commodity prices.
Due to weaknesses in average oil prices in the first nine months of 2016, Oman experienced a larger revenue gap in January-September 2016. The sharp drop in fiscal revenue, outstripping the modest reduction in fiscal expenditure led to widening of fiscal deficit under the period under review, the Mid-Year review said.
Accordingly, the Sultanate's annual State General Budget for the year 2017 has been formulated as a policy response to attain expenditure restraint, broadening of non-oil revenue and greater economic diversification.
The monetary aggregates in Oman continued to expand during 2016, albeit with some moderation, but still ended with a broad money growth of 5.6 percent on a year-on-year basis as at the end of September 2016.
Given the low inflationary environment and the slowdown in economic activities, the CBO continued with its accommodative monetary policy stance. Despite a general slowdown in economic activities, the balance sheet of other depository corporations (includes conventional banks and Islamic banks and windows) continued on the growth path with increased accretion to deposits and credit.
The interest rates in general, witnessed an increase over the first three quarters of 2016. Merchandise trade balance registered a smaller surplus of RO 1,168 million in January- September 2016 - a decrease of 48.1 percent over the same period a year ago. The recent trend in merchandise trade indicates that current account deficit in 2016 would widen further. It is anticipated that the current account deficit would be financed partly by draw-down of Government reserves and partly by increase in net loans of the general Government under the financial account. Reflecting the country's overall balance of payments position and the financing policy of public debt, the gross foreign assets of the CBO during the first three quarters of 2016 increased by 12.4 percent.