IMF Projects Oman’s GDP to Grow 2.4% in 2025

The International Monetary Fund (IMF) on Monday said that Oman’s economy is set to expand at a faster pace over the medium term, with overall GDP growth projected at 2.4% in 2025 and 3.7% 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 remained low, edging up from 0.6% in 2024 to 0.9% between January and April this year y-o-y, and despite a contraction in hydrocarbon output due to continued OPEC+ oil production cuts, real GDP growth strengthened to 1.7% in 2024 (up from 1.2% in 2023), boosted by robust nonhydrocarbon activity, notably in manufacturing and services.

This was outcome of the discussions between an IMF staff team led by Cesar Serra, which visited Oman between May 21 and 29, and Omani officials on economic and financial developments, the outlook, and the country’s policy priorities.

Lower oil prices are expected to weigh on fiscal and external positions. After turning out at 3.3% 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% of GDP during 2025-2026 before increasing over the medium term, shored up by the resumption in oil production and continued fiscal reforms.

The Central government debt declined further to 35.5% of GDP in 2024, down from 37.5% in 2023, as the government continued allocating part of the fiscal surplus toward debt repayment.

The state-owned enterprises (SOE) debt was reduced to around 31% 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% of GDP in 2024 but is projected to shift into an average deficit of about 2% 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 IMF team noted.

Banking sector Resilient

The IMF also said that Oman’s banking sector remains sound, supported by strong asset quality, ample capital and liquidity ratios, and sustained profitability. The 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 US, 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, the IMF said.

The IMF also said that the structural reform implementation continued, with Oman Tax Authority making steady progress on its Tax Administration Modernisation Program, the Central; Bank of Oman (CBO) further refining its liquidity management framework, and the financial development agenda proceeding with several initiatives to expand access to finance.

The 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 mobilised from private sector investors.

“Efforts to develop the renewable energy sector are underway, including work to foster green hydrogen investment and production. The 11^th Five-Year Development Plan for 2026-2030 is being finalised under the overarching goal of accelerating economic diversification,” the IMF said.