The inflation situation in the sultanate is showing a downward trend supported by the easing of global commodity prices, particularly of food items, which will be considerably lower during 2013, according to the Central Bank of Oman (CBO).
In its Mid-Year Review of the Omani Economy 2012 report, CBO said that non-fuel commodity prices, for which Oman is dependent on the global economy, are expected to decline 2.9 per cent in 2013.
“The situation on the inflation-front has been improving in Oman. The price of food items, which is the major imported item in Oman is expected to decline by two per cent in 2013,” the CBO said in its report.
In the first nine months of 2012, average inflation in Oman was 2.9 per cent. Most of the inflation in Oman is from two commodity groups – 'food, beverages and tobacco' and 'personal care items and other services.'
CBO said that the combined contribution of both these commodity groups to inflation came down 'significantly' to around 50 per cent during the first nine-month period of 2012 as compared to 71 per cent in 2011, mainly due to the decline in prices of both groups.
The report said that in the first nine months, the contribution to inflation of the 'food, beverages and tobacco' group declined to around 26.6 per cent from 40 per cent in 2011, which implies that food, beverages and tobacco prices have gone down in the first nine months of 2012.
The contribution of the ‘personal care items and other services’ group to inflation also declined to 22.8 per cent during the first nine months of 2012 from 32 per cent in 2011.
“However, inflation at any point in time is subject to several exogenous shocks, both external and internal. External shocks could be in the form of pace of global recovery and rise in global commodity prices, while internal demand and supply factors like domestic liquidity, government expenditure and pace of GDP growth could affect inflation,” the central bank said.
CBO said that given the benign inflation environment at the current juncture, it could pursue with its accommodative monetary policy. “CBO is closely monitoring the price situation in the domestic and global markets. Policy makers will have to devote attention in controlling the prices of the 'food, beverages and tobacco’ and ‘personal care items and other services’ groups. However, the fact remains that bulk of the items of these two groups is imported,” CBO said.
The report added that consumer price inflation in GCC countries is expected to remain below four per cent in 2013.