Oman is expanding beyond hydrocarbons, maintaining macroeconomic stability, and building a diversified growth model. It is no longer the Gulf’s quiet outlier but a country quietly setting a new standard for sustainable economic development in the region.
The World Bank commended Oman’s fiscal consolidation as a model of economic reform in its June 2025 Gulf Economic Update. Oman’s economy is expanding steadily, driven by robust non-hydrocarbon growth, structural reforms, and strategically targeted investments.
Over the past five years, Oman has significantly curtailed public spending, reducing it by approximately 16% of GDP, while also reducing public debt from over 68% in 2020 to roughly 35% of GDP in 2024, and achieving a budget surplus of 7.5% in 2022. Real GDP growth increased to 1.7% in 2024, from 1.2% in 2023, and is set to accelerate to 2.4% in 2025 and 3.7% in 2026. Inflation remains low by regional standards, rising 0.3 percentage points year-on-year in January–April 2025 to 0.6%. Price stability continues to support purchasing power and investment confidence.
An encouraging sign is the sharp rise in non-hydrocarbon exports, which now constitute about one-third of total exports, up from just 12% in the early 2010s. Chemicals, base metals (especially aluminium), plastics, and mineral products are leading the way. Structural reforms aimed at improving tax collection, reducing subsidies, and fostering a more flexible, private–sector–oriented economy have laid the groundwork for more sustainable and diversified growth.
Oman’s economy was once vulnerable to the bust-and-boom cycles of the global oil market. Downturns imposed significant economic strain, while upswings often led to the postponement of critical reforms. As a result, the country witnessed periods of economic stagnation and dependence on conditional economic support from its partners.
Human capital development lies at the heart of Vision 2040. In 2023 alone, more than 13,000 young Omanis joined the private sector.
Diversification programme
Faced with the twin shocks of the COVID-19 pandemic and plummeting oil prices, Oman's economic fragility was laid bare. Real GDP contracted by 2.8% while the fiscal deficit surged to 19.3% of GDP. Muscat's response—the adoption of austerity measures to preserve its access to international debt markets —proved critical amid debt redemptions totalling $11bn in 2021–22. However, with debt rising from 15% of GDP in 2015 to 80% by 2020, the urgency of accelerating economic diversification had never been clearer.
Under the leadership of Sultan Haitham, Oman appears to have moved beyond the structural dependencies associated with hydrocarbon-driven growth. His administration's Vision 2040 agenda—partly informed by Saudi Arabia's Vision 2030 —sets a long-term trajectory for economic diversification and sustainability. Reforms are broad and span fiscal policy, subsidy rationalisation, and human capital development.
Fiscal reform
Fiscal policy has become central to realising Vision 2040. The government rolled out excise taxes in 2019 and VAT in 2021 – unthinkable just a decade ago. Tax revenue remains modest, amounting to just 4.5% of GDP in 2023; however, there is scope to mobilise a greater portion by broadening the VAT base—primarily through reducing exemptions (excluding basic food items), and revisiting the VAT rate over time. Moreover, in June 2025, Oman became the first Gulf state to impose a 5% personal income tax on individuals earning more than $109,000 annually—affecting roughly 1% of the population— with the tax set to take effect in 2028 as part of its medium-term fiscal programme.
Labour market and human capital
Human capital development lies at the heart of Vision 2040. A new wage modernisation scheme now links salaries to certified skills and performance-based incentives, while the digital platform Tawteen has helped place over 850,000 Omanis in the workforce. In 2023 alone, more than 13,000 young Omanis joined the private sector, and over 9,000 were retrained in high-demand sectors. These initiatives are complemented by mid-career upskilling programmes and the Skills Partnership policy, which ties training directly to Omanisation targets.
Students from Oman Tourism College.
Non-oil growth sectors
Oman is also leveraging its natural resources and strategic geographical position to build a robust non-oil economic sector, encompassing logistics, transportation, manufacturing, renewable energy, and tourism. Logistics and transport contributed approximately $4.4bn (6.1% of GDP) from January to the end of September 2024. The economic hubs Duqm, Sohar, Salalah, and Khazaen are attracting large-scale foreign investment. Duqm Special Economic Zone alone drew $16.4bn in 2024 from Kuwaiti, Chinese, and other international investors, including in green hydrogen and logistics.
Manufacturing exports reached $4.2bn in Q1 2025, up 8.6% year-over-year, supported by liberalised ownership laws, streamlined licensing through the "Invest Easy" platform—a digital one-stop-shop for businesses launched in 2020 by Oman's Ministry of Commerce, Industry, and Investment Promotion—and enhanced legal frameworks. In 2019, the government introduced significant legislation to improve the business environment, including new laws on public-private partnerships, foreign capital investment, privatisation, bankruptcy, and corporate governance.
Green energy transition
Renewable energy capacity has grown significantly. In January 2025, Oman inaugurated its largest (14.5 million square metres) solar project—the 1-gigawatt Manah 1 and Manah 2 plants—featuring over 2 million bifacial photovoltaic panels and 1,800 automated cleaning robots. This will increase the share of renewables in the energy mix from 6.6% to 11%, while offsetting an estimated 1.4 million tonnes of carbon dioxide annually. Oman aims to achieve 30% renewable electricity by 2030.
The launch of Future Fund Oman and the establishment of Hydrogen Oman (Hydrom) reflect the Sultanate's pivot towards future-facing investment. Hydrom, a subsidiary of Energy Development Oman, signed in 2023 over $51bn in hydrogen projects with developers from Belgium, the Netherlands, the UK, Japan, Singapore, Germany, India, Kuwait, and the UAE. The projects will be rolled out over a seven-year period and collectively generate up to 15 GW of electricity, helping Oman achieve its goal of becoming a regional leader in green hydrogen.
Tourists ride small boats in Dhofar Governorate, southern Oman, July 21, 2022.
Tourism as a growth pillar
Tourism is emerging as a key pillar of growth. Oman is positioning itself as a high-profile, sustainable tourism destination through global campaigns, such as "Discover Oman," and participation in showcases like WTM London. Its strategy focuses on immersive, eco-conscious experiences— from luxury desert camps to heritage tours—supported by over 150 licensed eco-lodges and government incentives. As a result, tourism receipts increased fivefold between 2005 and 2023 to $2.5bn. Meanwhile, arrivals have exceeded pre-pandemic levels, reaching over 4 million visitors. The sector is projected to contribute $8.6bn or 7.6% of GDP in 2025.
Investment confidence
Therefore, it is not surprising that Oman's sovereign credit rating was upgraded to BBB in September 2024 and reaffirmed in April 2025—a marker of investor confidence in Oman's reform agenda. FDI inflows, especially in non-oil sectors, continue to grow, rising 17.6% over the past five years to $69.4bn by Q3 2024.
The future is bright
Taken together, these reforms mark a strategic shift—not just in policy but in mindset. Oman is not merely reacting to economic pressure; it is redefining its developmental model. The road ahead will be challenging, but the Sultanate is signalling that its journey beyond oil dependence is well underway.
