3.8 percent increase in credit granted by Oman’s banking sector

MUSCAT : The report issued by the Central Bank of Oman (CBO) indicated that credit granted to the private sector recorded a growth of 4.5 percent to reach RO 25.7 billion by the end of January 2024.

Non-financial corporations received the highest share of the total private sector credit at approximately 45.6 percent at end-January 2024, followed by Household sector at 45.3 percent. The share of financial corporations was 5.3 percent while other sectors received the remaining 3.8 percent of total private sector credit as at end- January 2024.

Total deposits held with ODCs (other depository corporations) registered a Y-o-Y significant growth of 12.8 percent to reach RO 29.7 billion at the end of January 2024. Total private sector deposits increased by 11.6 percent to RO 19.6 billion. In terms of sector-wise composition of private sector deposits, the biggest contribution is from household deposits at 48.7 percent, followed by non-financial corporations at 33.3 percent, financial corporations at 15.1 percent and other sectors at 2.8 percent.

The nominal GDP, as per the preliminary data released by National Centre for Statistics and Information (NCSI), showed a decline of 3.9 percent at end of the third quarter of 2023 over the same period of 2022. Despite the increase in non-hydrocarbon sector by 1.9 percent, the contraction was driven by decrease in output of the hydrocarbon sector by 15.4 percent.

As for the real GDP, it demonstrates an increase of 2.0 percent during the same period under discussion. Similarly, this expansion was driven by 0.5 percent of hydrocarbon sector and 2.7 percent of non-hydrocarbon sector. The Omani oil average price at end of December 2023 at $82.3 per barrel was lower by 13.7 percent than that in December 2022. The average daily oil production at 1048.7 thousand barrels as of December 2023 decreased by 1.5 percent. The Sultanate’s average Consumer Price Index (CPI) showed a Y-o-Y inflation of 0.1 percent as of January 2024.

The combined balance sheet of conventional banks showed a Y-o-Y growth of 1.8 percent in total outstanding credit as of end-January 2024. Credit to the private sector increased by 2.6 percent to reach OMR 20.1 billion while their overall investments in securities witnessed a increased by 28.1 percent to RO 5.7 billion at end-January 2024. Investment in Government Development Bonds decreased by 15.0 percent to RO 1.8 billion, while foreign securities increased dramatically by 156.3 percent to RO 2.4 billion, at the end of January 2024. On the liabilities side, aggregate deposits held with the conventional banks increased by 12.3 percent Y-o-Y to OMR 24.1 billion at end-January 2024.

Government deposits with conventional banks witnessed an increase of 0.3 percent at RO 5.2 billion, and deposits of public enterprises increased by 60.0 percent to RO 2.3 billion. On the other hand, private sector deposits, which accounted for 66.0 percent of total deposits with conventional banks, increased by 10.5 percent as of January 2024 to reach RO 15.9 billion.

The total assets of Islamic Banks and Windows increased by 16.3 percent on a Y-o-Y basis to RO 7.5 billion and constituted about 17.6 percent of the banking system’s assets at end-January 2024. Islamic banking entities provided financing of RO 6.2 billion at the end of January 2023, recording a growth of 12.7 percent over that a year ago. Total deposits held with Islamic banks and windows increased by 14.9 percent to RO 5.6 billion.

Among the indicators of monetary aggregates, broad money supply M2 at end-January 2024 increased by 14.0 percent to reach RO 23.4 billion. This is attributed to the increased in narrow money (M1) by 9.2 percent, along with 15.8 percent increase in quasi-money (Rial Omani saving and time deposits, certificates of deposit issued by banks, margin deposits and foreign currency denominated deposits). Looking at components of narrow money (M1) during the same period, currency with the public fell by 4.7 percent, while demand deposit increased by 13.2 percent.

The weighted average interest rate on RO deposits with conventional banks witnessed an increase from 2.059 percent at end-January 2023 to 2.586 percent at end-January 2024, and the weighted average lending rate increased from 5.306 percent to 5.546 percent over the same period. Meanwhile, the overnight Rial Omani domestic inter-bank lending rate rose to 5.193 percent in January 2024 from 4.357 percent a year ago. This is an outcome of the increase in the average Repo rate for liquidity injection by the CBO to 6.000 percent from 5.000 percent a year ago, moving with US Fderal Reserve.

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