MUSCAT : Oman’s economy is expected to grow by 4.0 percent in 2026, up from 2.4 percent in 2025, supported by stronger activity across both oil and non-oil sectors, according to the Central Bank of Oman’s Annual Report for 2025.

The report, which provides a comprehensive assessment of macroeconomic and financial developments in the Sultanate of Oman, said the country’s economic environment remained supportive during 2025 despite external challenges, while continued investment and structural reforms strengthened medium-term growth prospects.

Real GDP grew by 2.4 percent in 2025, compared with 1.6 percent in 2024, supported by growth in both oil and non-oil activities. Non-oil sectors expanded by 3.1 percent, reflecting continued momentum across key areas of the economy.

The agriculture and fisheries sector recorded the strongest growth at 10.2 percent, supported by efforts to strengthen food security and local production. Construction activity grew by 2 percent on the back of continued investments and development projects, while the services sector expanded by 3.1 percent, benefiting from strong domestic demand.

The CBO said the continuation of Oman’s investment programme played an important role in supporting growth, with strategic projects progressing across both the public and private sectors.

Inflation remained contained during the year, with the average rate standing at 1.0 percent in 2025, compared with 0.6 percent in 2024.

The Central Bank said the low inflation environment reflected stable domestic conditions, close coordination between fiscal and monetary policies and the effectiveness of the Omani rial’s exchange rate peg to the US dollar.

For 2026, inflation is projected to average around 2.6 percent, while remaining at manageable levels.

Oman’s fiscal position also remained resilient despite lower oil prices. The fiscal account recorded a limited deficit equivalent to 1.1 percent of GDP in 2025.

Public debt continued to decline, with the debt-to-GDP ratio falling to 34.6 percent from 35.4 percent in 2024.

The report said continued fiscal consolidation and stronger macroeconomic fundamentals have helped improve Oman’s sovereign creditworthiness and contributed to the restoration of its investment-grade credit rating.

Meanwhile, the current account recorded a deficit of 1.2 percent of GDP, mainly due to a 15 percent fall in oil exports following a 13 percent decline in oil prices, alongside higher imports linked to major investment and development projects.

Remittances by expatriate workers increased by 3.1 percent during 2025, reflecting continued economic expansion and improved labour market conditions.

Foreign direct investment flows remained stable, supporting external stability, while increased outward portfolio investment reflected higher holdings of foreign assets by the financial sector.

The CBO said the exchange rate peg continued to provide an important anchor for the Omani economy, supporting investor confidence and foreign investment flows.

In line with monetary easing in the United States and the requirements of the currency peg, the Central Bank reduced its basic interest rate to 4.25 percent by the end of December 2025.

Oman’s banking sector also recorded strong growth during the year.

Total banking sector assets increased by 9.2 percent to RO 44.6 billion by the end of December 2025, while total credit rose by 8.8 percent to RO35.3 billion.

Bank deposits increased by 7 percent to around RO 34 billion, while credit extended to the private sector grew by 6.8 percent, pointing to continued financing demand across major economic sectors.

Asset quality remained stable, with the overall non-performing loan ratio standing at 4.4 percent at the end of 2025.

Banks also maintained strong capital positions, with the capital adequacy ratio reaching 18.8 percent, well above the regulatory minimum of 13.5 percent. Liquidity conditions remained comfortable, supported by adequate funding and compliance with regulatory requirements.

Looking ahead, the CBO expects Oman’s economic position to strengthen further in 2026.

The Sultanate is projected to record a fiscal surplus of around 2.5 percent of GDP and a current account surplus of approximately 4.1 percent of GDP, supported by favourable oil prices, higher oil revenues, growth in non-oil exports and continued fiscal discipline.

The Central Bank stressed that implementation of reforms under the Eleventh Five-Year Development Plan 2026–2030 and Oman Vision 2040 will remain crucial to accelerating economic diversification and strengthening Oman’s competitiveness in global markets.

The CBO Annual Report for 2025 consists of five chapters covering the current macroeconomic assessment and outlook; production, employment and prices; public finance; money, banks and financial institutions; and external sector developments.

For all the latest news from Oman and GCC, follow us on Twitter, Instagram and LinkedIn, like us on Facebook and subscribe to our YouTube page, which is updated daily.