05 May 2009
GDP in current rates achieves 44 pc growth, Crude oil output rises by 6.8pc

Muscat -- The latest report (Oman Economic Review 2008) published by the National Economy Ministry shows that the economy of the Sultanate did well in 2008 as the GDP grew by 13 per cent and 44 per cent at fixed rate and current rates respectively compared to 2007. The report confirmed that the Omani economy was not affected by the global financial crisis which appeared in late 2008 and the beginning of 2009. The growth of liquidity and credit rates remained highly positive during this period. The local demand indicators, net imports and size of manpower in private sector did not give any indications for recession.

Still some indicators indicated a slight impact for the global financial crisis on the Omani economy. The average oil price for the Omani crude oil declined in February 2009 to $40.53, a price that has not been witnessed since January 2005. The average price in the first months of 2009 reached $45.25 per barrel, slightly higher than the estimated price in the state budget for 2009 which was at $45 per barrel. SMS index also declined at the beginning of 2009 to below 5,000 points to record 4,745 points in March 2009, a record that was last seen in May 2005.

The growth in liquidity of the economy witnessed a sluggish growth as the annual rate of M2 reached 18.6 per cent in February 2009 compared to the current rates for the growth of liquidity in February 2008 which was at 40.5 per cent and 30.9 in November 2008. The report pointed out that the value of oil and non oil exports in 2008 posted a higher level to achieve an unprecedented trade surplus that reached RO 5.69 billion. The fourth quarter of the year has witnessed a severe slump compared to the high growth in the third quarter of 2008.

The value of imports, which reached a record level in 2008, did not show any indicators for a potential decline in the last quarter of the year. This led to a slump in the trade surplus in the last quarter of 2008 to hit RO 1.11 billion. The report pointed out that the global financial crisis has some positive impacts on the Sultanate's economy as the inflation at the general indicator for consumer price declined with a big margin from its peak in June 2008, 13.7 per cent to 11.8 per cent in December and 9.8 per cent in January 2009. The real interest rates have been negative coupled with higher levels of liquidity. This has provided good incentives for lending.

The report pointed out that the Sultanate's GDP in current rates achieved a high growth rate in 2008, 44 per cent compared to 2007. The contribution of oil and non oil activities to the total growth has been high but still the oil activities made the bulk of this contribution. The contribution of the oil activities to the GDP was 28.7 per cent compared to 15.2 per cent for non oil activities. The current growth in oil activities is attributed to the great growth in production and rates together. The production of crude oil rose by 6.8 per cent in 2008 compared to 2007, the biggest in one year since 1996. The third quarter of 2008 witnessed the biggest increase as it grew by 3.6 per cent compared to the second quarter of the same year.

The report pointed out that the inflation rates in the Sultanate and the rest of Gulf countries have reached its peak in 2008. The consumer price index rose by 12.4 per cent compared to its level in 2007, which stood at 5.9 per cent. The level has been very much higher than that was recorded in 2006 (3.5 per cent) compared to the previous year. The annual inflation rates in consumer price index has followed the same model in Qatar and Saudi Arabia, at which the index reached its peak in the second quarter of 2008 and started its downturn in the third quarter with less downturn in the fourth quarter of 2008. The inflation rate in the Sultanate has exceeded the inflation rates in Kuwait, Bahrain and Saudi Arabia but still the rate in Qatar is higher than the rate recorded in the Sultanate.

The report added that the general index for the wholesale price for the construction materials in Muscat Governorate rose in 2008 by 20.2 per cent compared to 8.1 per cent in 2007 and 9.3 per cent in 2006. The general indicator for the construction material witnessed a steady growth in the first three quarters of 2008 either in its annual or quarterly growth rates. The second quarter of 2008 has been the highest quarterly growth rate, 9.9 per cent compared to the first quarter of the same year. The index also rose by 30.2 per cent in the third quarter of 2008 compared to the third quarter in 2007.

The high growth rates in 2008 were followed by a great slump in the index in the fourth quarter of 2008, 12.4 per cent compared to the third quarter in 2008. The report attributed the slump to the decrease in the steel price, which witnessed a 30.6, 40.6 per cent and 22.2 per cent in the first three quarters of 2008, then slumped to 60 per cent in the fourth quarter of the same year. The price of steel declined from RO 628 in July 2008 to RO 212.5 in November 2008. In March 2009, the price declined again to hit RO 193 per ton. Provisional figures for the month of December 2008 showed that the Public Finance had achieved a surplus of RO 1.58 billion against RO 7.98 billion revenues, and expenditure of RO 6.4 billion.

The government's revenues stood at 34.9 per cent in 2008 against 18.9 per cent in 2007. 86 per cent of the growth was attributed to high oil revenues and prices, the report explains. It indicated a 8.9 per cent increase in government's spending as compared to 2007, the increase was attributed to a 22.7 per cent increase in investment spending during 2008 as compared to 2007. It was attributed to civil ministries developmental spending whose average growth rose by 41.4 per cent to RO 1.13 billion during 2008 against RO 800 million during 2007, almost nearing the total developmental spending during 2006 which stood at RO 1.17 billion, it noted.

Oil and gas exports grew by 53.1 per cent during 2008 against 7.1 per cent during 2007 and by 11.1 per cent during 2006. Oil exports average stood at 69.5 per cent, being the highest, since 2000. Oil and gas exports fell by 21.3 per cent in the 4th quarter of 2008 as compared to 3rd quarter of 2008. Non-oil exports exceeded RO 1 billion during 2007, registering average growth of 58.9 per cent for the first time in the Sultanate's history, as compared to 2006. The average high growth continued during 2008, as it stood at 52.1 per cent, thereby raising exports value to about RO.2 billion. Oil and gas exports fell by 27.3 per cent in the 4th quarter of 2008 as compared to the 3rd quarter of 2008, thereby, leading to drop in average annual growth in the 4th quarter of 2008 to 2.1 per cent.

As per the report, the net imports grew considerably during 2007 to 50.2 per cent. Such high growth had continued during 2008 to reach 42 per cent as compared to 2007. Net imports value stood at RO 7.3 billion. The net imports grew by 35.8 per cent in the 4th quarter of 2008, exceeding the average growth of 30.3 per cent made in the 4th quarter of 2008. Continuity of imports net growth during the 4th quarter of 2008 was attributed to growth in imports of capital and consumers commodities. The middle consumption commodities imports fell by 6.3 per cent. Manpower at the private sector grew by 22.3 per cent during 2008 against 23.2 per cent during 2007, said the report. The number of additional manpower at the private sector stood at 15,419 during 2008, against 17,464 during 2007.

The number of additional foreign manpower at the private sector increased to 156,488 during 2008 against 127,734 during 2007. The average growth continued to rise steadily since the economic global growth period in 2006 until the 3rd quarter of 2008. The economy fell to 24.5 per cent during the last quarter of 2008. The number of additional foreign net manpower fell below 10,000 per month during the months of September and December of 2008. It remained high (above 10,000) per month all year through and in January 2009.

© Oman Daily Observer 2009