BUSINESS REPORTER
MUSCAT, JAN 16
Oman’s reform agenda is advancing, strengthening resilience and supporting a favourable economic outlook, the Executive Board of the International Monetary Fund (IMF) affirmed in a statement on Thursday, following the completion of its Article IV Consultation for the Sultanate of Oman.
The Fund noted in its report that Omani economic growth turned out at 1.6 per cent in 2024 before accelerating to 2.3 per cent (year on year) in the first half of 2025, supported by expansions in the nonhydrocarbon economy.
While OPEC+ production curbs continued to weigh on hydrocarbon output, nonhydrocarbon growth reached 3.5 per cent (year on year) in the first half of 2025, reflecting strong activity in construction, agriculture and fishing, tourism and logistics, it said.
Over the medium term, growth is expected to strengthen further as oil production gradually returns to capacity and the nonhydrocarbon economy remains robust, supported by ongoing reforms under Oman Vision 2040 and the rollout of large-scale investment projects. Inflation remained subdued, edging up to 0.9 per cent during January-October 2025 from 0.6 per cent in 2024, amidst contained price pressures across most categories.
“Prudent fiscal management has helped maintain the fiscal balance in surplus despite declining oil prices, with the overall balance estimated at 0.7 per cent of GDP in 2025”, the Fund stated.
“The nonhydrocarbon primary deficit is estimated to have narrowed by 2 per cent of nonhydrocarbon GDP in 2025, reflecting expenditure restraint and improved nonhydrocarbon revenue collection. Government debt stood at 36.1 per cent of GDP by September 2025. The current account balance is estimated to have turned into a deficit of 1.1 per cent of GDP in 2025, weighed down by softer oil prices”.
The 2025 Financial Sector Assessment Programme (FSAP) found the financial sector to be resilient against severe shocks as banks remain sound, with ample capital and liquidity buffers and robust profitability, the report said.
Risks to the near-term outlook are tilted to the downside, according to the IMF. It cautioned that an escalation of trade tensions and deepening geoeconomic fragmentation would weaken global demand and dampen oil prices, dragging down Oman’s economic growth and fiscal and external positions. Renewed regional geopolitical tensions could disrupt trade and dampen tourism and investment.
On the upside, higher oil prices could arise from a global growth upturn or intensified geopolitical tensions affecting oil supply and accelerated structural reforms would bolster confidence and enhance economic diversification, it said.
Endorsing the thrust of the IMF staff appraisal, the Executive Board commended Oman’s economic resilience, underpinned by steady reform implementation under Oman Vision 2040.
Directors highlighted the robust expansion of nonhydrocarbon economic activities, alongside the continued strengthening of fiscal and external positions. While noting that the outlook remains favourable, the Directors emphasised the importance of sustaining prudent policies and the reform momentum, particularly to continue diversifying the economy and enhance potential growth.
The Directors also welcomed the authorities’ continued commitment to prudent fiscal management and intergenerational equity. They emphasised the need to further advance tax policy and administration reforms, phase out untargeted subsidies while protecting the most vulnerable and rationalise non-essential spending.
The Directors also underscored the importance of reinforcing fiscal frameworks as well as governance and transparency, including developing a fiscal rule and strengthening public investment management as well as budget preparation and execution.
Consolidating stabilisation funds, strengthening debt management and developing sovereign asset-liability management are key priorities going forward, they noted.
Directors welcomed the progress in financial sector reforms and the findings of the Financial System Stability Assessment that the banking system is well capitalised and broadly resilient to shocks. They recommended additional efforts to safeguard financial stability and further develop the financial sector.
Directors called for operationalising a macroprudential strategy, continuing to enhance supervision and regulation, improving AML/CFT frameworks and further strengthening the financial safety net and crisis management frameworks. They also emphasised the importance of deepening capital markets and addressing structural impediments to SME financing.
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