Review of Banking and Monetary Developments –...

Data issued by the Central Bank of Oman indicated that the total deposits held with ODCs reached RO 24.0 billion at the end of November 2020, increasing by 3.5 percent from November 2019. Meanwhile, total private sector deposits increased by 10.8 percent to RO 16.5 billion.

As per the preliminary data released by National Center for Statistics and Information (NCSI), Oman's nominal GDP showed a decline of 13.4 percent during the second quarter of 2020 over the same period of last year. The contraction was driven by a 20.0 percent decline in the hydrocarbon sector coupled with the decline in non-hydrocarbon sector by 9.9 percent during the second quarter of 2020. The Omani oil price, averaged $46.5 per barrel during Jan-Nov 2020, was lower by 27.3 percent over the corresponding period of last year. Moreover, the average daily oil production decreased by 2 percent to 951.1 thousand barrels during this period. The Sultanate Consumer Price Index (CPI) witnessed a year-on-year (Y-o-Y) negative growth of -0.8 percent during Jan-November 2020.

The other depository corporations (ODCs) represent the combined activities of conventional and Islamic banks in Oman. The total outstanding credit extended by ODCs grew by 1.9 percent to RO 26.3 billion at the end of November 2020, while credit to the private sector showed a relatively moderate growth of 0.5 percent (Y-o-Y) to reach RO 22.9 billion. The shares of non-financial corporate sector and the household sector (mainly under personal loans) in the total private sector credit stood at 46.5 percent and 45.1 percent, respectively, at end-November 2020. The share of financial corporations was 5.0 percent and other sectors received the remaining 3.4 percent of the total private sector credit as at end-November 2020.

In addition, total private sector deposits increased by 10.8 percent to RO 16.5 billion. In terms of sector-wise composition of private sector deposits, the households deposits represented the share at 51.2 percent, followed by non-financial corporations at 32.2 percent, financial corporations at 14.2 percent and the other sectors at 2.4 percent.

The combined balance sheet of conventional banks showed a Y-o-Y growth of 1.0 percent in total outstanding credit as of end-November 2020. On assets side, conventional banks' credit to the private sector decreased marginally by 1 percent Y-o-Y to RO 18.8 billion while their overall investments in securities increased by 20.5 percent to RO 4.2 billion at end-November 2020. Investment in Government Development Bonds increased by 18.6 percent over the year to RO 1.8 billion while their investments in foreign securities stood at RO 1.1 billion at the end of November 2020, lower by 7.1 percent over the position a year ago. Aggregate deposits held with conventional banks increased by 3.0 percent Y-o-Y to RO 20.3 billion at end- November 2020. Government deposits with conventional banks decreased by 17.3 percent to RO 4.4 billion, while deposits of public enterprises decreased by 7 percent to RO 1.2 billion. Private sector deposits, which accounted for 70 percent of total deposits with conventional banks, increased by 11 percent during Jan-Nov 2020 to reach RO 14.2 billion.

Islamic banking entities provided financing of RO 4.2 billion at the end of November 2020, recording a growth of 7.3 percent over that a year ago. Total deposits held with Islamic banks and windows increased by 6.7 percent to RO 3.7 billion. The total assets of Islamic Banks and Windows increased by 7.7 percent on a Y-o-Y basis to RO 5.2 billion and constituted about 14.5 percent of the banking system's assets as at end-November 2020.

Among the indicators of monetary aggregates, narrow money (M1) at the end of November 2020 increased by 11 percent Y-o-Y to RO 5.6 billion. Likewise, quasi-money (Rial Omani saving and time deposits, certificates of deposit issued by banks, margin deposits and foreign currency denominated deposits) registered a significant increase of 9.2 percent during this period. Broad money supply M2 (M1 plus quasi-money) grew by 9.7 percent to reach RO 19.1 billion at the end November 2020.

The weighted average interest rate on RO deposits decreased marginally from 2.029 percent at end November 2019 to 1.951 percent at end November 2020, while the weighted average RO lending rate increased from 5.481 percent to 5.489 percent over the same period. Meanwhile, the overnight Rial Omani domestic inter-bank lending rate fell significantly to 0.948 percent in November 2020 from 2.163 percent a year ago, reflecting transmission of policy rate cuts by the Federal Reserve and by the CBO. The average Repo rate for liquidity injection by the CBO at end-November 2020 stood lower at 0.5 percent compared with 2.250 percent a year ago.