Review of Banking, Monetary Developments During December 2017

Economic activity in the Sultanate improved during the year 2017 after having contracted in the previous two consecutive years mainly due to the recovery in crude oil prices. The average price of Omani crude oil during 2017 stood at USD 51.3 per barrel as against USD 40.1 per barrel during the previous year.

The recovery in growth seen during the period January until September 2017 has been fairly broad based with the hydrocarbon sector growing at 23.9 percent and the non-hydrocarbon sector registering a growth of 4.9 percent with overall GDP growth at 10.1 percent.

Inflationary conditions in the Sultanate generally remained benign with some upward movement on account of increase in energy prices and user fees. Average annual inflation based on CPI for the Sultanate during January till December 2017 stood at 1.6 percent.

Policy measures aimed at rationalizing expenditure and increasing revenue helped in fiscal consolidation during the year. The financial health of banks in terms of asset quality, provision coverage and capital adequacy remained strong.

The banking sector in the Sultanate continued to witness reasonable growth and supported the economic diversification initiatives including credit outlays to the SME sector.

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 the Sultanate. The total outstanding credit extended by other depository corporations stood at RO23.6 billion as at the end of December 2017, a growth of 6.4 percent over the level witnessed a year ago.

Credit to the private sector increased by 6.5 percent to RO21 billion as at the end of December 2017. Of the total credit to the private sector, the household sector (mainly under personal loans) stood at 46.1 percent closely followed by the non-financial corporate sector at 45.7 percent while financial corporations and other sectors obtained 4.9 percent and 3.3 percent, respectively.

Total deposits registered a growth of 5.6 percent to RO21.6 billion, with private sector deposits growing by 5.2 percent to RO14 billion as at the end of December 2017.

Sector-wise, the contribution of households in total private sector deposits was 48.2 percent, followed by nonfinancial corporations at 29.9 percent, financial corporations at 19.1 percent, and the other sectors at 2.8 percent.

Review of the activities of conventional banks indicates an annual growth in total outstanding credit disbursement of 4.1 percent as at the end of December 2017. Credit to the private sector increased by 3.8 percent to RO18.2 billion.

Conventional banks’ overall investments in securities grew by 19.1 percent to RO2.9 billion. Investment in Government Treasury Bills stood at RO454.9 million at the end of December 2017. Investment in Government securities inclusive of GDBs, Government Sukuk, and others increased by 2.3 percent over the year to RO1.34 billion.

Aggregate deposits held with conventional banks increased by 1.9 percent to RO18.6 billion in December 2017 from RO18.3 billion a year ago. Government deposits with conventional banks marginally rose by 0.8 percent to RO4.9 billion while deposits of public enterprises decreased by 2.6 percent to RO0.9 billion during the same period.

Private sector deposits, which accounted for 67.3 percent of total deposits with conventional banks, increased by 2.6 percent to RO12.5 billion in December 2017 from RO12.2 billion a year ago.

The core capital reserves and undistributed profits of conventional banks as at the end of December 2017 stood at RO4.6 billion.

Source: Oman News Agency