Muscat – Oman’s economic outlook has strengthened significantly, with S&P Global Ratings raising its forecast for real GDP growth in 2026 to 3.5% from 1.6%, as higher oil production, stronger energy prices and increased trade and logistics activity support the economy.

The ratings agency, which on Friday affirmed Oman’s ‘BBB-’ long-term and ‘A-3’ short-term sovereign ratings with a stable outlook, expects economic growth to accelerate from 2.3% in 2025.

S&P said Oman’s ability to maintain hydrocarbon exports through ports with direct Arabian Sea access has strengthened its position amid regional disruptions.

“Oman continues to be notably positioned among its Gulf neighbors because its hydrocarbon exports do not rely on the Strait of Hormuz. This has allowed for the unobstructed export of oil and gas through ports that have direct Arabian Sea access,” S&P said.

Growth outlook strengthens

S&P expects Oman’s average daily oil production to increase to 1.1mn barrels per day (bpd) in 2026 from 1.03mn bpd in 2025, before rising to 1.2mn bpd during 2027-2029. As a result, real GDP growth is expected to average about 2.4% over 2027-2029.

Non-oil activity also contributed to the expansion, increasing about 1.3% year-on-year in the first half of 2026, supported by trade and logistics, IT and financial services, the agency said.

S&P expects higher hydrocarbon activity to support both oil and non-oil growth, although geopolitical conditions could weigh on some non-oil activities.

Oman’s position as an alternative regional trading and logistics hub is also strengthening. Cargo volumes at the ports of Salalah and Sohar increased approximately 15% and 52%, respectively, in the first half of 2026.

S&P said this strategically fits Oman’s longer-term plans to expand its transport sector as GCC countries seek greater interconnectivity.

Fiscal position improves

The stronger economic and oil outlook is accompanied by a significant improvement in Oman’s fiscal position.

S&P expects a fiscal surplus of 4.8% of GDP in 2026, compared with its previous forecast of a 0.7% deficit. For 2027, it forecasts a surplus of 2.2% of GDP, while the fiscal position is expected to move close to balance in 2028-2029 as oil prices decline.

Non-oil revenue is expected to increase over the coming four years, supported by improved collection efforts and higher customs and duties as economic activity expands.

With Oman actively managing its debt stock, gross government debt is forecast to stabilise at just below 30% of GDP by 2029, compared with about 32% in 2025 and a post-pandemic peak of 68%. S&P said the decline reflects the government’s continued commitment to deleveraging and active debt management.

Oman’s external position is also expected to benefit from stronger export flows. S&P forecasts export flows to increase by about 35%, resulting in a current-account surplus of 3.5% of GDP in 2026.

Reforms and diversification

S&P also highlighted progress in Oman’s structural reforms and economic diversification.

The agency said stronger coordination across ministries is helping create a more durable institutional structure to support Oman Vision 2040. It said several targets under the 10th Development Plan for 2021-2025 had been nearly achieved or exceeded. For example, total investment reached 25.5% of GDP, against a target of 26.5%, while non-oil sector growth reached 3.9%, exceeding the 3.2% target.

Under the 11th Development Plan for 2026-2030, S&P expects Oman to continue focusing on deepening capital markets, with the Muscat Stock Exchange’s current market capitalisation at about 37% of GDP, while further enhancing financial-sector regulation.