MUSCAT, SEPT 8
The Central Bank of Oman (CBO) has issued the new edition of its Annual Report, providing a comprehensive assessment of the Sultanate of Oman’s macroeconomic and financial developments during 2025, while highlighting the outlook for 2026. The report reviews the domestic economic environment, highlighting trends in real activity, inflation, fiscal and external positions and the performance of the banking sector.
Oman’s macroeconomic environment remained supportive in 2025, with economic activity continuing to expand at a robust pace, despite external headwinds. This provided the Government with the necessary policy space to advance structural reforms. Investment continued to be an important driver of growth, supported by continued progress in strategic projects across both the public and private sectors. Inflation remained low, reflecting the credibility of the peg and stable domestic conditions. Fiscal and external balances recorded modest deficits, while public debt continued its declining path. The banking sector remained well-capitalised, liquid and resilient, supported by sound asset quality, prudent risk management practices and limited exposure to external shocks.
Real GDP growth accelerated in 2025 to 2.4 per cent (from 1.6 per cent in 2024), supported by both the hydrocarbon and nonhydrocarbon activities. Non-hydrocarbon activities expanded by 3.1 per cent, driven by continued growth across key sectors. Agriculture and fisheries recorded the strongest growth at 10.2 per cent, reflecting ongoing efforts to strengthen food security and expand domestic production, while construction activity grew by 2.0 percent, on the back of continued investment and development projects. Services activity continued to record solid growth at 3.1 in 2025, benefitting from strong domestic demand and broad-based expansion across key service sectors. Over the medium term, economic activity is expected to strengthen further, buoyed by continued expansion across non-hydrocarbon sectors and sustained investment activity.
Inflation in Oman remained low and well contained, reflecting the effectiveness of the exchange rate peg as a credible nominal anchor and the relatively limited pass-through of global price pressures into the domestic economy. Average inflation recorded a modest increase of 1.0 per cent in 2025, up from 0.6 per cent in 2024, indicating the presence of mild inflationary pressures, while remaining at manageable levels supported by stable domestic demand conditions and strong coordination between monetary and fiscal policies.
In 2025, Oman's fiscal position remained resilient, notwithstanding lower oil prices. The government successfully implemented the State Budget while balancing fiscal sustainability objectives with continued investment in growth-enhancing initiatives. Fiscal balance recorded a modest deficit of 1.1 per cent of GDP. Public debt continued its downward trajectory, with debt-to-GDP ratio declined to 34.6 per cent in 2025 from 35.4 per cent in 2024. Continued fiscal consolidation and strengthened macroeconomic fundamentals further improved in Oman’s sovereign credit profile, contributed to the restoration of investment-grade status.
The external sector remained broadly resilient despite a more challenging external environment in 2025. The current account balance recorded a modest deficit of 1.2 per cent of GDP. This shift was primarily driven by a 15 per cent decline in hydrocarbon exports, reflecting lower oil prices, which fell by 13 per cent during the year, as well as stronger import demand associated with major investment and development projects. Importantly, Workers’ remittances increased by 3.1 per cent in 2025, broadly reflecting the continued expansion of economic activity and favourable labour market conditions. Meanwhile, the financial account remained supportive of external stability in 2025, with stable net FDI inflows, while Portfolio outflows largely reflected increased foreign asset holdings by the financial sector.
The Exchange rate peg has continued to serve as appropriate nominal anchor in light of Oman economic structure, while supporting investor confidence and FDI. Within this framework, domestic monetary conditions remained closely aligned to developments in US monetary policy. In line with the easing US monetary policy cycle and the requirements of the peg, the CBO lowered its policy rate to 4.25 per cent by the end of December 2025.
Throughout the year, the CBO continued to ensure that the banking sector effectively served the needs of the real economy. The sector continued to play a pivotal role in supporting economic activity through effective financial intermediation, mobilising savings and channeling funds to productive sectors of the economy. Supported by sustained economic activity and strong public confidence, the sector continued to expand in 2025. Total banking sector assets increased by 9.2 per cent to reach RO 44.6 billion at end-December 2025. Total credit increased to RO 35.3 billion, showing a growth of 8.8 per cent over 2024. Aggregate deposits of banks increased by 7.0 per cent in 2025 to reach RO 34.0 billion by end-December. Credit to the private sector increased by 6.8 per cent, reflecting continued financing demand across key sectors of the economy.
Profitability indicators continued to reflect healthy earnings performance, while asset quality remained stable, with the gross non-performing loans (NPLs) ratio contained at 4.4 per cent as of December 2025. Banks also maintained strong capital buffers, with the capital adequacy ratio reaching 18.8 per cent, well above the regulatory minimum requirement of 13.5 per cent. Liquidity conditions remained comfortable, supported by ample funding and compliance with prudential liquidity requirements.
Oman’s outlook remains broadly positive despite global uncertainties. Real GDP is projected to accelerate to 4.0 per cent in 2026, supported by both hydrocarbon and non-hydrocarbon sectors. Inflation remains contained, average inflation in Oman is projected at 2.6 per cent in 2026, remaining comfortably contained under the peg.
Supported by favourable oil prices, continued fiscal discipline and ongoing structural reforms, Oman is expected to record sizable fiscal and external surpluses in 2026. Fiscal and current account balances are expected to register surpluses at about 2.5 per cent and 4.1 per cent of GDP respectively, on the back of stronger hydrocarbon revenues and robust growth in nonhydrocarbon exports.
Looking ahead, continued reform agenda under the Eleventh Five-Year Development Plan (2026–2030) and Oman Vision 2040 will remain essential to fostering a more diversified, competitive economy, and supporting stronger medium term growth prospects.
The CBO Annual Report provides a detailed macroeconomic analysis of Oman’s major sectors of the economy through five Chapters namely Current Assessment and Macroeconomic Outlook (Chapter I); Output, Employment and Prices (Chapter II); Public Finance (Chapter III); Money, Banking and Financial Institutions (Chapter IV); and External Sector Developments (Chapter V). — ONA
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