Oman's economy is projected to grow by 3.7 percent in 2026, supported by increased oil production and resilient non-hydrocarbon sectors, despite headwinds from the conflict in the Middle East, the International Monetary Fund said on Tuesday.
An IMF staff team led by Abdullah AlHassan visited Muscat from June 7-15 for consultations on economic and financial developments. In a statement at the conclusion of the mission, the IMF said Oman's oil and natural gas infrastructure has remained largely unaffected by the regional conflict, enabling the country to increase production and exports amid supply disruptions elsewhere in the region.
Real GDP growth accelerated to 2.4 percent in 2025 from 1.6 percent in 2024, supported by both hydrocarbon and non-hydrocarbon activity. The IMF projects growth of around 3.7 percent in 2026, driven by higher oil output, before moderating to 3 percent in 2027. Non-hydrocarbon growth is expected to ease to 2.5 percent in 2026 as the conflict affects tourism and construction, before recovering to 3.2 percent in 2027 on the back of a broad-based recovery.
Inflation remains contained but is rising. Average inflation was 1 percent in 2025 but rose to 2.8 percent year-on-year during January-May 2026, driven by higher food and transportation prices linked to the regional conflict. The IMF noted that adverse impacts from the war have so far been limited to inflationary pressures and select non-hydrocarbon sectors.
Oman's fiscal and external positions are set to strengthen significantly. After the fiscal surplus narrowed to 0.6 percent of GDP in 2025 due to lower oil prices and increased capital spending, the IMF projects it will widen to 4.5 percent of GDP in 2026 and 4.2 percent in 2027, supported by higher oil revenues and continued fiscal discipline. Central government debt continued its downward trajectory, reaching 34.7 percent of GDP by end-2025, down from much higher levels in previous years.
The current account balance posted a deficit of 1.9 percent of GDP in 2025 but is expected to shift to a surplus of about 3 percent of GDP in both 2026 and 2027, bolstered by stronger hydrocarbon revenues and robust growth in non-hydrocarbon exports. The banking sector remains resilient, the IMF said, underpinned by comfortable capital and liquidity ratios, strong asset quality, and profitability.
Risks to the near-term outlook are tilted to the downside given the elevated uncertainty from the conflict. A prolonged escalation could lead to a deeper regional and global economic slowdown, weighing on tourism, non-hydrocarbon exports, and foreign direct investment inflows, and adversely affecting Oman's growth prospects as well as its fiscal and external positions. Upside risks include a swift resolution of the conflict, higher sustained oil prices, and increased transshipment activity through Oman's ports.
The IMF team's visit did not result in a Board discussion.
Source: International Monetary Fund (IMF)
