Oman: The GCC’s Quiet Reformer in Motion

Oman is making steady but strategic progress. With new tax reforms, prudent fiscal management, and growing investor confidence, the country is positioning itself as a disciplined outlier in the Gulf

1. Growth and Diversification

Oman recorded real GDP growth of 2.5 percent in the first quarter of 2025. The non-oil sector grew by 4.4 percent while oil GDP saw a slight contraction. The IMF expects the economy to grow by 2.4 percent in 2025 and by 3.7 percent in 2026. Sectors driving this include tourism, manufacturing, and logistics.

Foreign direct investment continues to focus on renewable energy, particularly green hydrogen, with several large-scale projects backed by European and Asian partners.

2. Inflation and Tax Policy

Inflation remains very low at around 0.9 percent in early 2025, making Oman one of the most stable price environments in the region.

In a landmark move, Oman has issued a royal decree to implement personal income tax. The tax will apply to high-income individuals earning more than 42,000 Omani rials annually and is expected to come into effect in 2028. This makes Oman the first GCC country to formally commit to such a measure.

Although delayed, the policy reflects long-term thinking and signals a willingness to move toward fiscal independence and diversification of revenue beyond hydrocarbons.

3. Debt and Capital Markets

The government is reducing public debt faster than expected. Public debt stood at approximately 35.5 percent of GDP in 2024 and is projected to fall to around 30 percent by the end of 2025.

Oman is also becoming more active in the sukuk market. In 2024, sukuk represented over 60 percent of local bond issuance volume. Despite global uncertainty, Oman successfully tapped international markets and maintained investor interest without aggressive pricing.

4. Banking and Structural Reform

Oman's banking sector outlook was revised to positive by Moody’s in early 2025. Capital buffers remain strong and asset quality is improving.

At the same time, the IMF and local observers have flagged the need for greater digital investment and public sector reform. Labor market dynamics remain a key challenge. The government is under pressure to narrow wage gaps between public and private sectors, expand vocational training, and improve female participation in the workforce.

Bottom Line: A Quiet Success Story with Institutional Depth

Oman is not chasing headlines, but it is building credibility where it counts. Fiscal discipline, targeted reforms, and cautious but deliberate innovation in tax policy show a willingness to modernize without disrupting stability.

Investor outlook

✔ Macroeconomic stability

✔ Clear fiscal direction

✔ Rising credibility with lenders and investors

⚠ Need for faster execution on digital and labor reforms

⚠ First mover risk with personal income tax