IMF commends resilience of Oman’s economy and reform momentum

Muscat: The International Monetary Fund (IMF) has commended the resilience of Oman’s economy and the continued momentum of its structural reforms, following the conclusion of its Article IV consultation mission to the Sultanate of Oman for 2026.

A team from the IMF, led by Abdullah AlHassan, visited Muscat from June 7 to 15 to discuss economic and financial developments, the outlook and Oman’s policy priorities with government authorities.

At the conclusion of the visit, the IMF said Oman’s economy continues to demonstrate resilience despite regional headwinds from the war in the Middle East. The Fund noted that the adverse impact on the Sultanate has so far been limited to inflationary pressures and select non-hydrocarbon sectors.

The IMF said Oman’s oil and natural gas infrastructure has remained largely unaffected, enabling the country to increase oil production and exports amid regional supply disruptions.

According to the IMF, Oman’s real GDP growth accelerated to 2.4 per cent in 2025, up from 1.6 per cent in 2024, supported by both hydrocarbon and non-hydrocarbon activities. Growth is projected to rise further to around 3.7 per cent in 2026, driven by increased oil production, before easing to 3 per cent in 2027.

Non-hydrocarbon growth is expected to ease to 2.5 per cent in 2026, reflecting the impact of the regional conflict on tourism and construction. However, it is projected to recover to 3.2 per cent in 2027 on the back of a broad-based recovery.

The IMF said inflation remained contained at an average of 1 per cent in 2025, before rising to 2.8 per cent year-on-year during January-May 2026. The increase was driven mainly by higher food and transportation prices.

The Fund also said Oman’s fiscal and external positions are set to strengthen, supported by higher oil revenues and continued fiscal discipline.

After narrowing to 0.6 per cent of GDP in 2025 due to lower oil prices and increased capital spending, the fiscal surplus is projected to widen to 4.5 per cent of GDP in 2026 and 4.2 per cent in 2027.

Central government debt continued its downward trajectory, reaching 34.7 per cent of GDP at the end of 2025.

The current account balance, which posted a deficit of 1.9 per cent of GDP in 2025, is expected to shift to a sizeable surplus in 2026 and 2027, at around 3 per cent of GDP. This is expected to be supported by stronger hydrocarbon revenues and robust growth in non-hydrocarbon exports.

The IMF also highlighted the strength of Oman’s banking sector, describing it as resilient and supported by comfortable capital and liquidity ratios, strong asset quality and profitability.

However, the Fund cautioned that risks to the near-term outlook remain tilted to the downside due to elevated uncertainty from the war in the region. It said a prolonged escalation could lead to a deeper regional and global slowdown, weighing on tourism, non-hydrocarbon exports and foreign direct investment inflows, while also affecting Oman’s growth prospects and fiscal and external positions.

At the same time, the IMF said upside risks could come from a swift resolution of the war, higher sustained oil prices and production, increased transportation and logistics activity in support of regional integration, and a faster pace of reforms under Oman Vision 2040.

The Fund said sustaining the momentum of policy reforms will be key to accelerating Oman’s economic transformation while strengthening fiscal and external sustainability.

It identified key priorities, including further improving tax administration, strengthening medium-term fiscal frameworks, transitioning to an active liquidity management framework, deepening the financial sector, improving transparency of state-owned enterprises, increasing female labour force participation and continuing renewable energy initiatives.

The IMF’s concluding remarks also highlighted Oman’s steady progress in implementing structural reforms and maintaining macroeconomic stability, while reinforcing the importance of continued reform efforts to support growth, diversification and long-term resilience.