Growth figures released by the Ministry of National Economy for 2009 put real GDP growth at 1.1%. We estimated real GDP growth of 4.5% in 2010 based on the significant increase in oil production, which stood at 865,000 barrels/day, owing to enhanced oil recovery (EOR) techniques. We forecast that growth will increase to 4.7% in 2011 on the back of higher oil prices fuelled by the regional unrest and will rise further to 5% in 2012 owing to a rise in private and government consumption as well as increased spending.

The Omani economy will remain vulnerable to any downturn in domestic oil production and to fluctuations in oil and gas export prices. GDP growth will continue to rely on the hydrocarbons sector, but as oil extraction becomes increasingly difficult and expensive, the diversification programme will become more important. Oil and gas accounted for just over 40% of GDP in 2009 (compared with just over 50% in 2008). Liquefied natural gas (LNG) production will rise modestly over the forecast period, but insufficient gas reserves mean that even with plans for a fourth LNG train, exports will remain subdued. The expansion of ports, the diversification into manufacturing (such as aluminium production) and the development of tourism infrastructure will boost non-oil exports, although there is a risk that these will be affected by the protests in major industrial areas such as Sohar and the Rusayl Industrial Estate. A major downside risk to our growth assumptions is the escalation of protests in the sultanate and the shortage of gas supplies; gas is used in EOR, desalination and electricity generation for heavy industries such as aluminium and fertilisers.