How Oman kept 2025 inflation at 0.81%: Through subsidies, controlled imports, and stable food supply

Time of India

6 days ago

Oman's overall inflation climbed modestly by 0.81% during January–May 2025/Representative Image
TL;DR:
Oman
's inflation rose by 0.81% in the first five months of 2025, compared to the same period in 2024.
Import prices increased by 1.3%, producer prices by 4.1% in Q1.
Food inflation declined slightly due to cheaper vegetables and seafood; highest price growth seen in miscellaneous goods & services (+6.04%).
Regional variation: highest in
Al Dakhiliyah
(1.58%), Musandam (1.51%); lowest in South
Al Batinah
(−0.04%).
Oman's overall inflation climbed modestly by 0.81% during January–May 2025, a continuation of stable consumer price trends, according to CPI data released by the Ministry of Economy.
While import and producer costs edged upward, robust food price controls and government support helped moderate overall pressure on households.
Inflation Drivers: Import & Producer Costs
The slight increase in Oman's inflation can be largely attributed to shifts in external costs, particularly import and production prices. The Import Price Index rose by 1.3%, indicating moderate exposure to global supply chain pressures and commodity fluctuations.
Notably, imported food and construction materials were key contributors to the increase, though the effects were softened by long-standing trade relationships and bulk procurement strategies.
Meanwhile, the Producer Price Index jumped 4.1% in Q1 2025 compared to the same period last year. This rise primarily reflected higher input costs in manufacturing and energy-intensive sectors such as cement, metals, and transportation.
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However, thanks to Oman's proactive fiscal management and diversification efforts, the pass-through to consumers remained relatively low.
Food Prices Provide Relief
Amid global concerns over food security, Oman has managed to keep food inflation under control, reflecting the success of its domestic agricultural initiatives and subsidies. The prices of food and non-alcoholic beverages fell by 0.17% as per Oman News Agency, with noticeable drops in vegetables (–4.63%), seafood (–3.69%), and meat (–0.13%).
Government procurement programs, coupled with seasonal domestic supply from Dhofar and Al Batinah regions, contributed to keeping prices stable.
Other staples such as bread, cereals, and non-alcoholic beverages also saw marginal declines. However, inflation was observed in sugar and sweets (3.13%), dairy and eggs (2.88%), oils and fats (1.28%), and fruits (1.05%), largely due to higher import freight rates and regional demand during Ramadan and summer tourism peaks.
Still, the overall food basket remained stable, avoiding the volatility seen in other parts of the Gulf.
Category Trends: Beyond Essentials
Beyond food, the miscellaneous goods & services segment saw the sharpest price increase at 6.04%, encompassing personal care, financial services, and insurance. Healthcare costs rose by 2.71%, partly due to higher medical input costs and increased demand for private services. The transport category also recorded a 2.68% increase, mostly due to rising vehicle maintenance and insurance costs, while hotel and restaurant prices were up by 1.08% due to strong tourism inflows and peak season tariffs.
Notably, tobacco and telecom costs remained stable, reflecting government regulation and price monitoring efforts.
Regional Inflation Patterns
Inflation levels varied across governorates, with inland and tourism-heavy areas showing higher growth:
Al Dakhiliyah (1.58%) and Musandam (1.51%) posted the highest rates due to increased transportation and services-related costs.
Other regions like South Al Sharqiyah (1.24%), Al Dhahirah (1.09%), and Al Wusta (1.06%) also saw moderate increases.
On the other hand, South Al Batinah recorded a marginal deflation of –0.04%, possibly linked to oversupply in food production and lower transportation costs due to infrastructure upgrades.
Northern regions like North Al Sharqiyah (0.21%) and North Al Batinah (0.42%) maintained inflation well below the national average.
Why It Matters
Consumer Relief
: With subsidies in place, basic needs like food, utilities, and fuel remained stable, safeguarding purchasing power for low- and middle-income households.
Macroeconomic Resilience
: The contained inflation supports Oman's broader economic goals, particularly those outlined in Vision 2040 and the Tenth Five-Year Plan.
Growth Sectors Cushion Impact
: Continued expansion in agriculture, fisheries, and logistics helped offset volatility in import-heavy sectors.
Investors Watchful
: A low, predictable inflation environment is crucial for investor confidence, especially as Oman seeks to diversify its economy and attract FDI in logistics, tourism, and green energy.
Oman's moderate inflation of 0.81% through the first five months of 2025 reflects an economy balancing external cost pressures with effective internal controls. Strategic food security measures, fiscal prudence, and growing self-reliance in agricultural production have all contributed to keeping price rises contained. With regional inflation disparities narrowing and overall consumer prices largely under control, Oman is on track to sustain economic stability while building long-term resilience.