Economic Review: Third Quarter 2007 Sultanate of Oman

    This report relays the main stories at work in the Sultanate’s economy during the third quarter of 2007 and the main macro economic linkages, making use of the periodic data published within the Ministry of National Economy and some other government organisations. The main stories are:

1. The three months July to September 2007 saw a steady 8.3% year on year increase of GDP in current prices, matching the growth in the first half of 2007. The non oil sectors were the engines of growth in Q3 2007 with year on year growth of 18.1%, continuing a trend of consistently strong non oil sector growth for the last nine quarters since Q3 2005 when growth has exceeded 12% year on year.

2. This contrasts with the negative growth of 2% year on year in oil sector value added for July to September 2007. When added to the first six months of 2007, the cumulative oil sector growth for January to September stood at -0.2%. This has been despite the price of Oman Crude rising to new heights in Q3 2007 of US$ 68.5 per BBL and is mainly due to the lower crude oil production in 2007.

3. Domestic demand continued to act as a strong driver of growth in Q2 and Q3 2007. Net imports in Q2 2007 maintained the strong growth of Q1 2007, exceeding the rate of growth of net imports throughout 2005 and 2006. The total number of new private sector jobs created in the first nine months of 2007 (103,959) already exceeds the total created in the whole of 2006. This high private sector workforce growth has strengthened the demand side of the economy creating buoyant demand for both local and imported goods..

4. Whilst the strong growing demand side has been a driver of economic growth it continued to be a driver of accelerating increases on prices, along with other factors. Increases in the Consumer Price Index (CPI) of 6.5% in July to September 2007 were the highest year on year increases recorded in any quarter and represent a rapid acceleration of the rate of increase compared to 4.7% in Q1 2007 and 4.8% in April to June 2007

5. The growth of liquidity in the economy has been a driver of growing CPI inflation. The fact that Q3 2007 showed some signs of slow down in liquidity is welcome. However, credit to the private sector grew at an increasing rate in Q3 2007, especially lending for personal loans. Whilst some of world’s mature economies experienced a severe ‘credit crunch’ during Q3 2007, following the US sub prime mortgage crisis, Oman’s economy experienced a credit boom.

for More Information download the attached filee