According to latest official figures, Oman¡¯s real GDP contracted by 0.9 percent in 2017, down from 5.0 percent growth in 2016. The high growth performance in 2016 was driven by record oil production levels and a significant drop in real net taxes (in terms of GDP at factor prices growth was only 1.8 percent in 2016). In 2017, as Oman complied with the OPEC+ agreement, a 2.7 percent contraction in the hydrocarbon sector was only partially offset by 0.4 percent growth in the nonhydrocarbon sector, driven by fisheries. On the expenditure side, the overall contraction is driven by weak public consumption and investment. Inflation increased slightly to 1.6 percent in 2017, up from 1.1 percent in 2016, reflecting higher fuel and housing prices.
Real GDP growth is projected to recover to 2.8 percent over the medium term in line with higher hydrocarbon production from Khazzan gas field and the unwinding of OPEC+, and the potential boost from diversification investments. Inflation is projected to accelerate to 3.2 percent by 2020 indirect taxes are introduced.