Global Arab Network | Oman maintains positive growth despite global financial crisis

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Oman maintains positive growth despite global financial crisis

Global Arab Network - - Mohamed Tamer

Monday, 25 January 2010 22:51

The Omani economy has shown ability to counter and confront the repercussions of the large decline in oil prices. Following the global financial crisis, Oman oil prices dropped from US$(101.1) per barrel in 2008 to US$ (56.7) in 2009, a decrease of (44%). Despite this, the national economy registered a positive growth of (3.7%) at constant prices in 2009 and contraction rate not exceeding (20%) at current prices.

The ability of the national economy to counter this external shock stems from a number of factors mainly the increase in oil production rates, the economic policies aiming to further economical diversification and encouragement of investment, and the expanding fiscal policies adopted by the government to support domestic demand, monetary policies and other measures undertaken for liquidity availability and support of the banking and financial sector stability in general.

By virtue of efforts to raise oil production rates, the daily production increased to (810) thousand barrel in 2009, an increase of (7%) compared to 2008 leading to mitigation of impacts of oil prices decrease on oil activities. The preliminary estimates of national accounts reveal that these activities recorded contraction at current prices not exceeding (37%) in 2009.

The adopted fiscal, economic and monetary policies proved their feasibility in absorbing the repercussions of the great reduction in oil prices and the others due to the global financial crisis on performance of non-oil activities. The said recorded a positive growth in 2009 at constant prices of (2.9%) and a negative growth at current prices not exceeding (2.2%).

The repercussions of global financial crisis had a marked impact on the performance of the national economy in 2009 related to balance of payments. The preliminary estimates indicate that the overall proceeds of the hydrocarbon exports decreased at (41%) in 2009 due to the great decrease in oil prices ; non-hydrocarbon of Omani origin proceeds increased at (16%) and the re-export operations continued growth at (14%) in 2009 reflecting the growing importance of the role of the Sultanate as centre for transit trade.

Due to the fall back of the domestic demand and decrease of commodities prices at the global market, the overall value of imports retracted at (23%) in 2009 compared to 2008. Hence, the balance of trade surplus decreased to R.O (4.4) billion in 2009, a decrease at (32%) compared to 2008. Also, the current account balance surplus decreased to R.O (212) million in 2009 compared to R.O (2.1) billion in 2008. In view of this , the ratio of the current account balance surplus to GDP at current prices fall back to (1.1%) in 2009 compared to (9.1%) in 2008.

The data of the CPI in the Sultanate indicate a decline in inflation rate in 2009 to about (3.6%) compared to (12.4%) in 2008. The marked downturn in inflation rate could be attributed to the drop in commodities’ prices in global markets resulting from the global financial crisis that led to contraction in global demand, the monetary policies adopted by the Sultanate together with the approved policies and measures to foster services related to consumer protection, furthering markets’ monitoring and consumers’ awareness.

The monetary and financial policies that had been adopted fortified the Omani banking system in 2009 against the repercussions of the global financial crisis. The main aggregates of the Sultanate’s commercial banks witnessed a marked increase; total assets/liabilities increased at the end of October 2009 at (5.5%) compared to the same in 2008. Also, the total balance of credit and total balance of deposits scaled at (10%) and (8%) respectively. Besides, the exposure of these banks to the defaulted global and regional institutions was limited assisting in stability of their positions.

The money market was distinguished by the growth of money supply where the domestic liquidity (M2) increased by the end of October 2009 by (5.6%) compared to end of October 2008.

Muscat securities market indicators, and since the second half of 2008 to the first quarter of 2009, showed a descending trend due to the negative repercussions of the global financial crisis on global financial markets. Since the second quarter of 2009, the market activity elucidated a continuous improvement due to the stimulus policies package undertaken by governments worldwide which led to a relative stability in global financial markets, and the fiscal and monetary policies adopted domestically that assist in stimulating the national economy activity and protection of the financial sector.

Muscat market index scaled up in the 13th of December to (6129.5) point achieving an increase of (12.7%) compared to the same date in 2008; though it was lower than the peak recorded in May 2008 by (47%). The market value increased in the 13th of December 2009 to R.O (8.9) billion, an increase at (11.8%) compared to same date of 2008. The total value of trading during 2009 till the 13th of December rose to R.O (6.7) billion recording an increase at (11.2%) compared to same period of 2008.

In view of the anticipated increase of oil prices at global markets in 2010 and continuance of financial, economical and monetary policies conducive to stability and growth of national economy, it is expected that the national economy will record a positive growth rates at constant prices of (6.1%) and at current prices at (18.4%) .

In regard to the development programme of civil ministries in the Seventh Five-Year Development Plan which is considered the prime mover of the Plan and its executive tool , and noting that this is the last year of the Plan, and as for the observance awarded by the government for development programmes, the completion of infrastructure projects and use of surpluses of previous period of the Plan to implement a number of development projects that serve the national economy, the Plan since its beginning and till November 2009 witnessed a large increase in size of approbations for the development programme. This was a result of approval of a number of additional development projects in response to the Royal Directives during the Royal Tours.
The aforesaid impose exploring the pressing needs of citizens at the Wilayats and Regions and work for their fulfillment along with the implementation of a number of development programmes, and the additional funds for rehabilitation of infrastructure affected by the exceptional climatic conditions that hit the Sultanate during 2007 which were approved by the Ministerial committee formed as per Royal Decrees for repairing affected infrastructure totaling R.O (494) million.
Thus, the total additions reached about R.O (6665) million raising the approbations of the development programme at (221%) to amount to about R.O (9681) million compared to the approved (3016) million at the start of the Plan. The following is a review of the main sectors where the additions were concentrated during the previous period of the Plan.

First: Additional approbations for road sector by R.O (1777) million including additional projects previously mentioned in our statements of previous years , and the additional road sector projects of 2009 at R.O (724) million that include:
-    Implementation of the first phase (Barka – Wdam Al Sahil) and the second phase (Sohar port- Khatmt Malaha ) of Al Batinah coastal road by R.O (274) million.
-    Roads paving projects at Wilayats in response to the Royal Directives during the 2009- Royal Tour by R.O (195) million for paving (1256) km.
-    Rehabilitation of roads and bridges of the first, second and third phases at Qurayat by R.O (37) million.
-    Construction of the roads according to the master plan at Al Duqm by R.O (43) million.
-    Al Zroob-roundabout (Al Buraymi) double-carriage road – 17 km - with studies and supervision by R.O (23) million.
-    Construction of Arjuut – Ashkhareet – Srfiet (Dhofar Governorate) by R.O (23) million.
-    The dual-carriage ring road from Arzat-roundabout to Rissaut -32 km- by R.O (20) million.

Second: Additional approbations for port sector by R.O (1025) million for construction, development and expanding of Al Duqm port (Al Wusta Region) by an additional R.O (788) million including port expanding, marine works, construction of the dry dock and superstructure with consultancy services and supervision.

Third: Additional approbations for housing sector by R.O (406) million for construction of (2200) housing units for owners of affected properties along the coastal road at Al Batinah as first phase , construction of (806) housing units at the Wilayats covered by the 2009- Royal Tour, building of (718) housing units at Qurayat for those affected by the exceptional climatic conditions, building of (184) house for social security and limited income families totally affected by the exceptional climatic conditions at a number of the Wilayats, construction of (400) housing units with annexes at Khor Suuli (Salalah). It is worth mentioning that the new housing units constructed at the various areas of the Sultanate during the Seventh Five-Year Plan amounted to about (4989) housing units.

Fourth: Additional approbations for airports sector by R.O (882) million, which include the following projects:
-    An amount of R.O (450) million was approved during the previous year for the first main phase of the civil works at Muscat international airport which include the runway, roads, pathways, yard and the supporting services. A bidding was put for the new departure building in 3/12/2008 and opening of offers’ envelopes in 26/10/2009. Currently, the assessment of submitted bids is on, and the cost’s approval will be in light of the actual tender results.
-    Works of leveling, setting-up and construction of drainage channels to reclaim Muscat international airport soil by R.O (63) million.
-    Implementation of the projects of the first package concerning the construction of (4) regional airports with consultancy studies for designing and supervision at Sohar, Al Duqm, Ras Al Had and Adam by R.O (121) million.

Fifth: Additional approbations for health sector by R.O (247) million:
Include additional projects mentioned in our previous years statements and additional projects during 2009 that include:
-    Construction of the heart-diseases unit at Royal Hospital by R.O (26) million.
-    The 2009- Royal Tour health projects by R.O (20) million; the important of which is the reconstruction of Saham hospital by R.O (10) million, and rehabilitation of Samail hospital by R.O (6) million.
-    Rehabilitation of Jaalan Bani Bu Hassan hospital by an additional R.O (5) million.
-    Maintenance and purchasing medical equipments for projects anticipated to be completed during 2010 by R.O (6) million.
-    Rehabilitation of Sultan Qaboos Hospital at Salalah (the outpatient specialty clinic building) by R.O (3) million.
-    Construction of the high-pressure oxygen unit at Khoula hospital by R.O (3) million.

Sixth: Additional approbations for town planning and municipalities services sector:
Include the following projects:
-    The proposed compensations as first phase for the owners of properties affected by Al Batinah coastal road by R.O (120) million.
-    Removal of residues, pumping water pools and opening the main and internal roads affected by the exceptional climatic conditions at Muscat by R.O (15) million.
-    An amount of R.O (8) million to construct about (9406) lighting poles and developing internal roads as per the 2009- Royal Tour projects.
-    Construction of a fence around the Oryx protectorate and administrative control centers by R.O (5) million.
-    Rehabilitation of parks and afforestation affected by the climatic conditions at Muscat by R.O (10) million.
-    Completion of the first phase of Khasab sewerage project by R.O (9) million.
-    Lighting and developing internal roads in a number of Wilayats by R.O (21) million.
-    Supporting Al Hafa area (Salalah) project by R.O (11) million.
-    Construction of dual-carriage roads, internal roads and bridges at Dhofar Governorate to facilitate traffic at a cost of R.O (53) million.

Seventh: Additional approbations for education sector by R.O (119) million:
Include the following projects:
-    Promoting the project of the Ministry of Education building by R.O (9) million.
-    Enhancing projects of additional class rooms, educational facilities, general education schools preparation, teaching aids and computer rooms by R.O (26) million.
-    Construction of a number of new schools and strengthening the established ones at the various Regions by R.O (19) million.

Global Arab Network

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