With a nominal GDP estimated by International Monetary Fund (IMF)[1] at around USD 107bn in 2024 (around 0.1% of the world economy) Oman is in the middle of an unprecedented transformation process, in the context of the implementation of the Vision 2040.
The growth pace of the economic activity consolidated at 1.2% YoY in 2024, according to the estimates of IMF, as the contraction of the hydrocarbon sector for the second year in a row (by an intensifying annual pace of 3.1%, as the production of oil diminished to below 1 million barrels per day, the lowest level since 2021) was counterbalanced by the acceleration of the non-hydrocarbon sector to 3.3% YoY.
Inflation continued to be subdued in Oman last year, the annual pace of the consumer prices decelerating to 0.8% (from 1.0% in 2023).
According to the forecast of IMF from January 2025 the annul growth pace of the economic activity in Oman would accelerate to 2.6% this year, 3.6% in 2026 and 4.4% in 2027. This scenario is supported by the prospects for the rebound of the hydrocarbon sector – annual paces of 1.0% in 2025, 2.9% in 2026, and 5.4% in 2027. At the same time, the annual growth pace of the non-hydrocarbon sector would accelerate to 3.4% in 2025, 3.9% in 2026, and 4.0% in 2027.
In this scenario the output gap would turn positive in 2026 and would widen in 2027 to the highest level since 2022, if we take into account the results of the econometric analysis done by employing the Hodrick-Prescott filter and the database of IMF. Furthermore, the annual pace of the potential output would accelerate to 3.4% in 2027, the highest level since 2014, as reflected in the following chart.
Figure 1. GDP vs. potential output in Oman (%, YoY)
Source: representation of the author based on the results of the econometric analysis, using IMF data, 2025
This positive outlook for the economic activity in Oman is supported by the favourable prospects for the dynamic of investments. The total investments / GDP ratio is forecasted by IMF to improve from 26% in 2024 to 26.5% in 2025, 27.3% in 2026 and 28.3% in 2027, due to the acceleration of the private investments, from 19.2% of GDP in 2024 to 21.5% in 2027.
In this respect, we mention the projects of incorporating the technological progress and the efforts in the transition towards the green economy (the share of the renewable energy sources in the electricity generation may triple by the end of this decade).
Inflation would gradually accelerate to 1.5% in 2025 and 2.0% in 2026 and 2027, but would maintain below the average level in the emerging and developing economies, given the monetary policy of the central bank (the RO is pegged to the US dollar).
We point out the fact that Oman is an emerging economy with sound public finance, with budgetary surplus for the third year in a row in 2024, estimated by IMF at 6.2% of GDP. The international financial organisation forecasts a budget balance / GDP ratio of 2.5% in 2025, 2.7% in 2026, and 3.2% in 2027. Therefore, the public debt/GDP ratio would decline from 34.9% in 2024 to 34.7% in 2025, 33.0% in 2026 and 31.5% in 2027.
As regards the current account/GDP ratio IMF forecasts levels of 1.4% in 2025, 0.9% in 2026 and 1.7% in 2027, down from 2.5% in 2024.
Last, but not least, the population of Oman would continue the upward trend, being estimated to outpace 6 million by the end of the decade.
In this context, the GDP/capita in Oman as a share of GDP/capita in the developed countries would decline from around 60% at present to around 55% by the end of the decade, as reflected in the following chart.
Figure 2. GDP/capita in Oman as % of GDP/capita in developed countries (PPP)
Source: representation of the author based on the database of IMF, 2025
Among the challenges for the economy of Oman in the mid-run we mention the reform of the fiscal system, developing the financial market and improving the convergence towards developed countries.
[1] International Monetary Fund (IMF) (2025). https://www.imf.org/en/Publications/CR/Issues/2025/01/22/Oman-2024-Article-IV-Consultation-Press-Release-and-Staff-Report-561155
About the author:
Dr. Andrei RĂDULESCU, Expert in global macroeconomy.
