- Oman's economy has demonstrated strong resilience thus far amid the war in the Middle East, supported by largely unaffected energy infrastructure, strong logistics activity, sound fundamentals, and continued prudent policies.
- Economic activity continues to expand, driven by stronger hydrocarbon production and resilient nonhydrocarbon growth, while inflation has risen amid higher food, transportation, and import costs. Fiscal and external positions are expected to remain robust.
- The challenging regional and global environment underscores the need to sustain the momentum of Vision 2040 reforms to preserve macroeconomic stability, strengthen resilience, and support Oman's growth ambitions.
Washington, DC: An International Monetary Fund (IMF) staff team, led by Mr. Abdullah AlHassan, conducted the 2026 Article IV consultation discussions in Muscat during October 25-November 8, 2026. At the conclusion of the mission, Mr. AlHassan issued the following statement:
"The Omani economy entered 2026 from a position of strength. Economic growth accelerated in 2025 and remained resilient in the first half of 2026, with real GDP expanding by 3.8 percent as stronger hydrocarbon activity offset weakness in construction, manufacturing, and tourism-related activities. Average inflation remained contained at 1 percent in 2025 but rose to about 3.0 percent (year-on-year) during January-September 2026, mainly reflecting higher food and transportation costs. Fiscal and external balances remained in surplus, with the fiscal surplus reaching 1.9 percent of GDP and the current account surplus estimated at 3.7 percent of GDP in the first half of 2026. Government debt declined to 30.4 percent of GDP at end-June 2026.
"The economic outlook remains favorable, despite heightened uncertainty. GDP growth is projected to accelerate to 4.5 percent in 2026, driven by stronger hydrocarbon activity and sustained nonhydrocarbon growth of 1.4 percent. Average inflation is expected to reach 3.0 percent in 2026 before gradually easing toward 2 percent over the medium term. The fiscal balance is expected to remain strong, with the fiscal surplus averaging about 5.3 percent of GDP during 2026-27. The current account is projected to return to a surplus of around 6.5 percent of GDP in 2026 and remain positive over the medium term.
"The fiscal stance in 2026 appropriately cushions the impact of the war while preserving fiscal prudence. Any additional support for vulnerable households and viable firms should be temporary, targeted, transparent, and accommodated through expenditure reprioritization. Additional oil windfalls should help rebuild buffers while creating space for investment in resilience and diversification. Over the medium term, sustained implementation of fiscal reforms, including stronger tax administration, the phasing out of untargeted subsidies while protecting the most vulnerable, and greater public investment efficiency, together with stronger fiscal frameworks, will be essential to safeguard fiscal sustainability and further enhance policy credibility.
"The exchange rate peg remains an appropriate and credible policy anchor. Steadfast implementation of the Monetary Policy Enhancement Project-including toward operationalizing an interest rate corridor and an overnight Omani Rial standing deposit facility- together with the gradual transition to a full-fledged treasury single account would strengthen monetary policy transmission and support the development of domestic money and capital markets.
"The banking sector remains well capitalized, liquid, and profitable, with limited direct exposure to the sectors most affected by the conflict. Continued implementation of the 2025 Financial Sector Assessment Program recommendations is important. Priorities include strengthening the macroprudential framework, and fully operationalizing financial safety nets, and crisis-management arrangements.
"Heightened regional and global uncertainty reinforces the need to accelerate the economic transformation and strengthen resilience under Vision 2040. Looking ahead, priorities include enhancing the efficient allocation of economic resources, reducing the state's footprint where private participation is viable, advancing labor market reforms, fostering trade integration, and strengthening resilience to natural disasters."
The IMF team expresses its appreciation to the Omani authorities and all counterparts for their excellent cooperation, constructive discussions, and warm hospitality throughout the mission.
