Oman's economy to grow to 2.4% by the end of this year

Times of Oman

6 days ago

Muscat: The real growth rate of the Omani economy will rise from 1.7 percent by the end of 2024 to 2.2 percent by the end of this year (the final year of the Tenth Five-Year Plan, according to the Ministry of Economy's Economic Forecasts 2025 report.
The report further indicated Oman's gross domestic product (GDP) at constant prices could rise from OMR38.3 billion at the end of 2024 to OMR39.2 billion at the end of 2025.
This is attributed to the improved performance of oil activities, which resumed growth during the year by 1.3 percent, after witnessing a decline by 3 percent at the end of last year. The contribution of oil activities to the GDP is expected to rise from OMR11.9 billion in 2024 to OMR12 billion by the end of this year. Non-oil activities are expected to grow by 2.7 percent this year compared to 3.9 percent in 2024. The report further expects continued rise in the added value of non-oil activities, reaching OMR28.6 billion by the end of 2025, compared to OMR27.9 billion in 2024.
In the medium term, the team's forecasts indicate that Oman's economic growth momentum will continue in 2026 as well as in 2027, amid the ongoing implementation of strategic projects in the non-oil sectors and the expected increase in oil production.
The report further indicated that inflation rate, based on the consumer price index (CPI) in the, is likely to see a small increase reaching 1.3 percent by the end of this year compared to 0.6 percent in 2024. The ministry said that this rate will remain within the target range of the Tenth Five-Year Plan (2021-2025), with the government continuing to subsidise prices of basic goods and services and the expectation of relative stability in commodity prices in global markets.
Regarding the global economic front, the International Monetary Fund (IMF) made significant adjustments to its economic growth forecasts in its April 2025 World Economic Outlook, lowering its global economic growth forecast for the current year from 3.3 percent in its January 2025 report to 2.8 percent in its April 2025 report. This reflects the direct and indirect impacts of new policies on global trade and global demand amidst heightened risks that require a continuous reassessment of forecasts, policies, and economic priorities.
The IMF's recent revisions cover most global economies at varying levels. The Fund expects advanced economies to grow at a slower pace from 1.8 percent in 2024 to 1.4 percent in 2025, driven by cautious expectations for the US economy, which is the main driver of growth in this group.
In the developing and emerging markets group, the IMF lowered its growth forecast to 3.7 percent in 2025, compared to 4.3 percent in 2024. This decline reflects increased pressure on supply chains due to higher tariffs. This reduction was significantly concentrated in the Chinese economy due to declining US demand for Chinese exports, the continuing repercussions of the real estate crisis, and weak levels of consumption and investment.
Regionally, although the International Monetary Fund lowered its growth forecasts for the Middle East and North Africa (Mena) region, the IMF was more optimistic compared to other economic groups. Growth in the region's economies is expected to rise to approximately to 3 percent in 2025, compared to 2.4 percent in 2024.
The improved growth in the region is attributed to the recovery in the growth rate of the economies of the Gulf Cooperation Council (GCC) countries, with expectations of rising oil production levels and continued improvement in the non-oil sectors, supported by the expansion of strategic investments in economic diversification and renewable energy projects.
Regarding the outlook for global economic growth, the future trajectory of the global economy is likely to be influenced by developments in protectionist trade policies, leading to increased levels of uncertainty and market volatility. If tariffs escalate, this could lead to a significant slowdown in global growth and trade, with repercussions for governments' financial policies and the interest rate orientations of major central banks.
The report indicated that, under the fundamental changes announced by the United States this year to its tariff regime, a 10 percent base tariff will be applied to imports of goods from all countries, with an additional 'reciprocal tariff' applied to approximately 90 countries. The additional tariffs use an unconventional methodology to achieve the concept of 'reciprocity,' as they are calculated based on multiple criteria, most notably the volume of bilateral trade and the structure of customs duties imposed on US goods in those countries' markets.
Regarding the impact of this policy on the economies of the GCC countries, the imposed customs tariff of 10 percent is among the lowest compared to other targeted economies. Therefore, the direct impact of these new customs tariffs is expected to be relatively limited. However, there remains the possibility of indirect effects resulting from reciprocal tariffs between the United States and its trading partners, which could collectively negatively impact global economic activity levels. Potential impacts may include fluctuations in oil prices, in addition to disruptions in global supply chains.
The report explained that by analysing foreign trade data between the Sultanate of Oman and the United States of America during 2014-2024, the balance of trade generally tends in favour of the American economy, with the exception of 2020, 2021, and 2022, when the trade exchange movement between the two countries achieved a trade surplus in favour of the Sultanate of Oman during these years.
However, the Omani economy, like other global economies, may be vulnerable to indirect repercussions from tariffs. Potential shifts in the global market could impact the Omani economy's trading partners. Slowing global growth is expected to lead to lower oil prices and reduced demand for oil. Tariffs could also exacerbate inflationary pressures in the US economy, potentially prompting the Federal Reserve to back down or postpone plans to cut interest rates, leading to higher imported inflation.
The report explained that, in the context of global trade variables and their potential impact on trade flows, global supply chains, and import and export costs, the Sultanate of Oman is an attractive investment destination, given its strategic geographic location linking Asian, African, and European markets. It also possesses advanced infrastructure and free zones that attract foreign investment. Re-export levels can also be increased by leveraging this unique geographic location and advanced infrastructure, as it can attract the exchange of goods from countries affected by customs duties and re-export them to target markets.