Washington, DC: An International Monetary Fund (IMF) staff team, led by Mr. Abdullah AlHassan, has concluded its 2025 Article IV consultation discussions in Muscat, acknowledging Oman's strong economic resilience in the face of global challenges. The findings from the mission indicate that Oman's economy continues to grow, bolstered by robust nonhydrocarbon activity and stable inflation levels. Fiscal and external positions remain robust, with a noted decrease in public debt levels.
According to International Monetary Fund, the Omani authorities have made significant progress in implementing reforms under Oman Vision 2040, focusing on social protection, labor market flexibility, business environment enhancements, state-owned enterprise reforms, and digital and renewable energy initiatives. The banking sector in Oman remains sound, and further financial sector development is emphasized as essential for diversification and private-sector growth.
Economic growth remained steady in 2024 and into the first half of 2025, driven by expansions in sectors such as manufacturing, wholesale and retail, logistics, construction, and agriculture. However, hydrocarbon GDP saw a contraction due to OPEC+ production curbs. Inflation was low, recorded at 0.6 percent in 2024 and 0.9 percent during January-October 2025. The fiscal balance posted a surplus of 3.3 percent of GDP in 2024, while the current account recorded a surplus of 3.2 percent of GDP, with government debt at 36.1 percent of GDP by September 2025.
The economic outlook for Oman remains promising, with growth projected to strengthen over 2025-26 as oil production cuts ease and nonhydrocarbon activities continue to expand. Inflation is expected to remain low and approach 2 percent over the medium term. Fiscal surpluses are projected to continue, although the current account may see a deficit in 2025-27 due to lower oil prices, before returning to a surplus as oil production and nonhydrocarbon exports recover.
Omani authorities remain committed to fiscal prudence, with a narrowing nonhydrocarbon primary deficit supported by expenditure restraint and improved revenue collection. Upcoming fiscal reforms, including tax modernization and introducing a personal income tax for high-income earners in 2028, are critical for fiscal sustainability. Rationalizing current spending and phasing out non-targeted energy subsidies while protecting vulnerable groups are part of the fiscal strategy.
The exchange rate peg remains effective in maintaining low and stable inflation. Ongoing enhancements in monetary policy, including new facilities and transitioning to a treasury single account, are expected to bolster monetary policy transmission.
The banking sector's strength is underscored by ample capital, liquidity buffers, and stable profitability. Efforts to strengthen the macroprudential framework and deepen capital markets are crucial for financial stability and sector development.
Reform progress under Oman Vision 2040 continues, with the 11th Development Plan offering opportunities for economic diversification, productivity boosts, and private-sector job creation. Key priorities include labor market reforms, business environment improvements, SME support, trade integration, renewables initiatives, and digital transformation, including AI readiness.
The IMF team expressed gratitude to the Omani authorities for their cooperation and hospitality during the mission.
