| Central Bank of Oman Issues Annual Report 2023 | | | 9/30/2024 4:10:00 AM | Central Bank of Oman Issues Annual Report 2023 | The Central Bank of Oman has issued its Annual Report for the year 2023, which provides a comprehensive analysis of the Sultanate of Oman's macroeconomic outlook over the past year. | <p style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3"><span>The Central Bank of Oman has issued its Annual Report for the year 2023, which provides a comprehensive analysis of the Sultanate of Oman's macroeconomic outlook over the past year. Economic activity achieved decent growth levels despite the global challenges in 2023, driven by a significant improvement in the performance of the non-hydrocarbon sector. Prices also remained stable as a result of government measures and procedures taken to contain global inflationary pressures. Moreover, macroeconomic outlook indicates that the Omani economy can achieve good growth rates during 2024.</span></span></p><p style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">The global economic environment remained challenging in 2023, marked by a series of economic events that led to a slowdown in economic activity amid rising interest rates. The ongoing threat of inflationary pressures, geopolitical tensions, disruptions in global trade, China's property sector crisis, and extreme climate events were among the factors that continued to test the resilience of the global economy. Despite a challenging global environment, Oman's government's policy measures and reforms have achieved notable success. Economic activity continued to expand and sustain its positive growth trajectory, driven by the recovery of nonhydrocarbon sectors. Inflation has remained low, largely reflecting lower energy prices, and subdued global and domestic demand conditions. Fiscal and external balances have been in comfortable surpluses in 2023, and public debt was significantly reduced from the year 2022. Moreover, the government's commitment to continued fiscal consolidation measures has created sufficient fiscal space to support economic activity.</span></p><p style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">After a strong rebound from the pandemic, economic activity in Oman moderated in 2023. Real GDP expanded by 1.3 percent in 2023, compared with 9.6 percent in 2022. The moderation was mainly due to OPEC+'s agreed production cuts, which led to hydrocarbon GDP growth of only 0.4 percent during the year. Additionally, non-hydrocarbon GDP also moderated to 2.4 percent in real terms, down from the high growth rate of 9.1 percent seen in 2022. Within the petroleum activities, output from crude petroleum declined by 0.1 percent, while natural gas output increased by 3.1 percent in 2023. Real growth in non-petroleum GDP was largely contributed by the agriculture, forestry and fishing with 6.9 percent, and the service sector with 3.5 percent growth, while non-petroleum industrial activities declined by 0.4 percent during 2023.</span></p><p style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">In the services sector, the 'telecommunications and information service activities', 'financial intermediation', and 'transport and storage', expanded by 8.4 percent, 8.0 percent, and 4.8 percent, respectively. This robust growth supported the non-hydrocarbon sector. It is worth noting that the services sector holds great potential to generate further momentum for economic diversification in Oman.</span></p><p style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">In 2023, Oman experienced a notable decline in inflation, benefiting from the monetary policy framework, fixed exchange rate regime and fiscal policy measures. The average consumer price inflation in Oman was 0.9 percent in 2023, a decrease from the 2.5 percent observed in 2022. This decline can be primarily attributed to lower energy prices, and subdued global and domestic demand conditions. Oman's inflation trajectory is significantly influenced by external factors, primarily due to its integration with global markets, as evidenced by fluctuations in oil prices and exchange rate movements. The impact of these factors on domestic inflation has been contained by an ongoing appreciation in the nominal effective exchange rate (NEER) and an increased focus on diversification. Additionally, government administrative measures have also helped contain the inflation rate. </span></p><p style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">Oman's fiscal position continued to improve, maintaining a comfortable surplus in 2023, driven by favorable oil and the adoption of prudent policy measures and improved fiscal discipline. As a result, the government achieved a fiscal surplus of 2.2 percent of GDP in 2023, marking significant progress towards its planned fiscal consolidation path, with the aim of achieving fiscal balance by 2024. These effective measures, along with the government's sound debt management strategy, enabled a reduction in the public debt-to-GDP ratio to 36.0 percent in 2023, down from 40.2 percent in 2022. Due to continued efforts in debt reduction and improved fiscal performance, Oman experienced positive and stable improvements in its credit ratings outlook during 2023, as recognized by credit rating agencies.</span></p><p style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">The CBO has continued to focus on ensuring that the financial sector serves a source of strength for the Omani economy. Consequently, the banking system in Oman showed improved performance with total assets of the banking sector increasing by 7.8 percent to reach OMR 41.8 billion at the end of 2023. Total credit increased to OMR 30.5 billion in 2023 showing a growth of 4.3 percent compared to its level in 2022. Total deposits OMR increased to 29.1 billion, with a growth of 12.3 percent as of end of 2023.</span></p><p style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">The banking sector continued to be profitable, demonstrating financial sustainability. Thus, gross non-performing loans (NPLs) remained reasonably low, at 4.5 percent as of December 2023, indicating strong asset quality. Also, the capital adequacy ratio (CAR) stood at 18.9 percent at the end of 2023, higher than the minimum regulatory requirement of 12.25 percent. Furthermore, the liquidity position of banks remained comfortable as indicated by the prescribed liquidity ratios. Furthermore, Monetary aggregates continued to expand reasonably during 2023. While reserve money (monetary base) expanded by 1.0 percent, broad money grew by 13.1 percent. The expansion of broad money was supported by the growth in the net foreign assets of the banking system, primarily attributed to the increase in foreign assets held by other depository corporations.</span></p><p style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">The external position remained robust in 2023, bolstered by a consistently favorable merchandise trade balance and improvements in both the services and primary income balances. These factors contributed to the current account remaining in surplus. The services account deficit narrowed significantly by 23.6 percent, largely due to a surge in inward travel and transportation services, which returned to pre-pandemic levels. The primary income saw notable improvement, driven by a reduction in debits from direct investment income and an expansion in overall investment income credits. As a result of these positive developments, the current account posted a surplus of OMR 1,014 million in 2023, compared to OMR 1,677 million in 2022. The financial account recorded a higher net outflow/net lending of OMR 1,227 million in 2023, compared to OMR 1,198 million in 2022 as a result of an outflow in both portfolio investment and other investment, mainly reflecting the debt repayments made by government and corporates during the year.</span></p><p style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3"><strong>Macroeconomic Outlook</strong><strong> for Oman</strong></span></p><p style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">The macroeconomic outlook of the Omani economy remains favorable, supported by sustained reforms under the strategic direction of Oman Vision 2040, and favorable energy prices, which are expected to maintain fiscal and external balance in surpluses. The oil prices are expected to remain at a higher-level providing crucial support to hydrocarbon activities. Non-hydrocarbon growth is expected to gradually increase to 3.0 percent over the medium term, supported by global demand recovery, continued reforms, and robust private investment amid a shift in composition towards investments in non-hydrocarbon sectors. The fiscal outlook for 2024 is projected to witness further improvement, buoyed by favorable oil prices and fiscal consolidation measures, which have positively influenced both fiscal and external positions.</span></p><p style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">Overall, the Omani economy is currently having a favorable outlook notwithstanding some downside risks stemming from global factors. In 2024, economic growth is projected to be higher, while inflation remains low. The year ahead provides Oman with a window of opportunity to accelerate the implementation of structural reforms. These reforms are critical to strengthen the economy's resilience while raising its prospects, which are essential for Oman to effectively address the challenges of tomorrow.</span></p><p style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">The CBO Annual Report provides a detailed macroeconomic analysis of Oman's major sectors of the economy through five Chapters namely Current Assessment and Macroeconomic Outlook (Chapter I); Output, Employment and Prices (Chapter II); Public Finance (Chapter III); Money, Banking and Financial Institutions (Chapter IV); and External Sector Developments (Chapter V). The Report also presents the audited balance sheet of the CBO and the independent auditor's report to the Board of Governors.</span></p><p style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">More details could be found in the full report, which can be accessed from the Central Bank of Oman's website </span><a href="http://www.cbo.gov.om/"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">http://www.cbo.gov.om</span></a><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3"> under the “Publications" section.</span><br class="ms-rteThemeFontFace-1 ms-rteFontSize-3"></p> | 0x010100C568DB52D9D0A14D9B2FDCC96666E9F2007948130EC3DB064584E219954237AF3900075E4FF44B3F64489802BE694C5C6FB70300A9BCF8A0432A87429120A5B0A0EDBFF9 | | |