Oman’s economy fared relatively well despite a sharp and sustained decline in oil prices since mid-2014, the Central Bank of Oman (CBO) has said in its fourth edition of the Financial Stability Report (FSR) 2016, released recently.
In the foreword of the report, the CBO Executive President has said that the country proactively kept high fiscal buffers, higher capital requirements for banks, low government debt and flexible wage contracts, because of which it fared well without much damage.
“The sharp and sustained decline in oil prices since mid-2014 has put significant pressures on the economy of Oman. However, the economy of Oman fared fairly well without much damage,” he said.
He expressed his confidence that a turnaround may be achieved by fiscal consolidation combined with relaxing counter-cyclical measures adopted earlier.
The report said that after five years of robust growth, the Omani economy recorded a contraction in 2015, mainly due to a fall in oil prices in the international market and partly due to the global slowdown. Despite increased oil production, net exports suffered a setback in 2015 due to low oil prices.
Prudent fiscal consolidation measures reduced the government expenditure. As a result, nominal GDP contracted by 14.1% in 2015 reflecting the reduction in two fundamental constituents of aggregate demand, namely, rationalization in government expenditure and slowdown in exports as against a robust average growth of 11.3% during the preceding five-year period from 2010 to 2014.
Creating more employment opportunities for the Omanis has been one of the major macroeconomic objectives of the government during the recent years. In 2015, employment of Omanis in the private sector increased by 6.1%.
Inflationary pressures in Oman eased significantly in 2015 mainly due to a fall in international commodity prices, reduced public spending in Oman and the appreciation of US dollar in real practical terms since mid-2014.
Annual inflation, measured by movement in the average Consumer Price Index (CPI) for the Sultanate, slowed down to 0.1% in 2015 compared with an average of 2.5% during the previous five years.
The recent behavior of prices in Oman owes its origin to both demand and supply side factors emanating from domestic as well as external sources. From the demand side, contraction in the nominal GDP in Oman in 2015 was mainly due to sharp fall in crude oil prices in the global markets and fiscal policies pursued by the government.
Meanwhile, the Sultanate of Oman has recently issued a new detailed and amended law to combat money laundering and financing of terrorism. The National Committee on Combating Money Laundering and Terrorism Financing said, in a press release, that this development comes in support of the ongoing national efforts to enhance the Sultanate’s legislation in the fight against the cross-border crimes of the era namely money laundering and financing of terrorism.
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