- The economy continues expanding, driven by ongoing investments in logistics, manufacturing, renewable energy, and tourism, while inflation remains low.
- The direct impact of global trade tensions on Oman is expected to be limited; however, lower oil prices and the potential slowdown in key trading partners' growth are projected to weigh on Oman's outlook.
- The momentum of structural reforms remains strong, supporting Oman's ability to navigate the challenging external environment and accelerate diversification
Washington, DC: A staff team from the International Monetary Fund (IMF), led by Mr. César Serra, visited Muscat, Oman, during May 21-29, 2025, to discuss economic and financial developments, the outlook, and the country's policy priorities. At the conclusion of the mission, Mr. Serra issued the following statement:
"Oman's economy continues to grow, while inflation remains low. Despite a contraction in hydrocarbon output due to continued OPEC+ oil production cuts, real GDP growth strengthened to 1.7 percent in 2024 (up from 1.2 percent in 2023), boosted by robust nonhydrocarbon activity, notably in manufacturing and services. The economy is set to expand at a faster pace over the medium term, with overall GDP growth projected at 2.4 percent in 2025 and 3.7 percent in 2026. This expected performance is driven by the phase-out of OPEC+ curbs and strong nonhydrocarbon growth, underpinned by ongoing investments in logistics, manufacturing, renewable energy, and tourism, but held back by the potential slowdown in key trading partners' growth. Inflation remains low, edging up from 0.6 percent in 2024 to 0.9 percent (year-over-year) during January-April 2025."
"Lower oil prices are expected to weigh on fiscal and external positions. After turning out at 3.3 percent of GDP in 2024—lower-than-previously estimated to accelerate key investments in infrastructure and in the education, health, and water sectors, as well as lower dividends from Energy Development Oman to fund its investing activities—, the fiscal surplus is projected to narrow to an average of 0.5 percent of GDP during 2025-2026 before increasing over the medium term, shored up by the resumption in oil production and continued fiscal reforms. Central government debt declined further to 35.5 percent of GDP in 2024, down from 37.5 percent in 2023, as the government continued allocating part of the fiscal surplus toward debt repayment. State-owned enterprises (SOE) debt was reduced to around 31 percent of GDP, supported by sustained progress on the SOE reform agenda under Oman Investment Authority. The current account balance posted a surplus of 2.2 percent of GDP in 2024 but is projected to shift into an average deficit of about 2 percent of GDP in 2025–2026, dragged down by lower oil prices and softer growth in nonhydrocarbon exports. A return to surplus is expected thereafter, conditional to oil production gradually rising to capacity."
"The banking sector remains sound, supported by strong asset quality, ample capital and liquidity ratios, and sustained profitability. Banks' net foreign asset position remains positive, while private sector credit growth continues to be strong, underpinned by an expanding deposit base."
"Risks to the outlook are tilted to the downside. While the direct impact of global trade tensions is expected to be limited—given Oman's modest exports to the U.S.—, indirect effects could be more pronounced. These, together with persistently high global uncertainty, may dampen oil demand and prices, potentially triggering an extension of oil production cuts, and resulting in sustained lower hydrocarbon proceeds. This, in turn, would weaken growth and fiscal and external positions. Higher-for-longer global interest rates and tighter-than-expected domestic liquidity—from subdued hydrocarbon revenues—may exacerbate these risks by increasing borrowing costs, reducing credit to the private sector, and further slowing down nonhydrocarbon growth. On the upside, accelerated reform implementation under Oman Vision 2040 would strengthen Oman's outlook."
"Structural reform implementation continues, with Oman Tax Authority making steady progress on its Tax Administration Modernization Program, the CBO further refining its liquidity management framework, and the financial development agenda proceeding with several initiatives to expand access to finance. SOE reforms are advancing, yielding tangible improvements in governance, profitability, and risk management, while Future Fund Oman has successfully launched operations, with numerous projects selected for funding and substantial capital mobilized from private sector investors. Efforts to develop the renewable energy sector are underway, including work to foster green hydrogen investment and production. The 11th Five-Year Development Plan for 2026-2030 is being finalized under the overarching goal of accelerating economic diversification."
"The IMF staff team would like to thank the Omani authorities and other counterparts for the open and productive discussions and their warm hospitality."
