World Bank lifts Oman 2026 growth to 3.1% as Gulf contracts

Key Points

1. The World Bank raised Oman's 2026 GDP growth forecast to 3.1%, up 0.7 points from April.
2. It projects the wider GCC economy will shrink 4.3% in 2026 after the Strait of Hormuz closure.
3. Oman is the only Gulf economy the bank expects to hold robust growth this year.

The latest:

Oman’s economy is now forecast to grow 3.1% in 2026, 0.7 percentage point above the World Bank’s April estimate, with a further 3.4% expansion projected for 2027. The bank credited higher hydrocarbon output, diversification and resilient non-oil activity. The same regional update expects the rest of the Gulf to slide into its sharpest downturn in decades.

Details:

• The fiscal picture: The World Bank expects Oman’s public finances to strengthen alongside growth, with the budget surplus reaching 4.1% of GDP in 2026 and 4.2% in 2027. The forecast rests on increased oil and gas production and continued expansion across non-oil sectors, according to the bank’s latest regional economic update.
• Why Oman is different: The bank said Oman stands out as the only GCC economy expected to maintain robust growth in 2026, pointing to hydrocarbon output, ports and export infrastructure located outside the Strait of Hormuz, and relatively resilient non-oil activity as the reasons it is insulated from the regional shock.
• The regional contraction: The World Bank projects the GCC economy will contract 4.3% in 2026, as the closure of the Strait of Hormuz disrupts hydrocarbon production and exports. Spillover effects are expected to weigh on tourism, aviation and logistics across the bloc.
• Qatar and Kuwait hit hardest: Qatar’s GDP is projected to shrink 20.9% in 2026, its weakest performance in more than five decades, while Kuwait’s economy is expected to contract 14.6%, the steepest decline in more than three decades. The bank attributed the scale of the losses to damage to energy infrastructure and limited alternative export routes.
• A different kind of shock: Unlike previous energy shocks that generally benefited oil exporters through higher prices, the bank said the current disruption imposes substantial costs on Gulf producers by restricting their ability to transport and sell hydrocarbons.
• The cushions elsewhere: Saudi Arabia benefits from its East-West Pipeline, while the UAE relies on export infrastructure outside the Strait and greater production flexibility after leaving OPEC. Bahrain’s more diversified base should limit its downturn, though the bank flagged disruptions to refining, tourism and business services, and constrained fiscal space.
• The 2027 rebound: Average GCC growth is projected to reach 10.3% in 2027, with Qatar’s GDP forecast to expand 26.7% as liquefied natural gas production resumes and Kuwait’s by 22% as oil exports normalise. The bank cautioned the rebound mainly restores lost production capacity rather than strengthening underlying growth.
• The lingering damage: Infrastructure damage, delayed investment and continued uncertainty are likely to weigh on activity even after hydrocarbon output recovers, according to the World Bank. It said losses in tourism, logistics and investor confidence could take longer to reverse.
• Food inflation: Average food inflation across regional economies rose from close to zero in January 2026 to around 6% in July, the bank said, as higher energy costs and shipping constraints lifted production and transport expenses. Disrupted maritime routes also pushed up freight and insurance costs.
• The inflation gap: Food inflation passed 7% in Bahrain and Oman, more than twice headline rates near 3%, leaving both among the economies with the widest gap. In Qatar it exceeded 12% while overall inflation stayed just above 2%.

Background:

The World Bank issues periodic regional economic updates with country-level growth forecasts. Its April estimate for Oman’s 2026 growth was 2.4%, the baseline against which the current 3.1% projection represents an upgrade.

Between the lines:

The bank’s own framing undercuts the headline rebound figure: a 10.3% average GCC growth rate in 2027 follows a 4.3% contraction, and the institution attributes it to restored capacity rather than new strength. Oman’s advantage, as described, is geographic rather than structural — ports sitting outside the Strait of Hormuz. The widening food-inflation gap suggests the cost of the disruption is reaching households faster than the aggregate GDP numbers imply.

What’s next

Watch whether hydrocarbon production and export volumes recover on the timeline the bank assumes, monthly food inflation prints against headline rates, and the next World Bank regional update for revisions to the 2026 and 2027 forecasts.