Outlook for 2011-15

• Political uncertainty will remain high for the foreseeable future as pro- and anti-regime forces continue to fight for control of territory in Libya in what risks becoming a protracted civil war.
• The Libyan leader, Muammar Qadhafi, has shown that he is determined to hold on to power at any cost, and the balance of military capability remains on his side in spite of ongoing international air strikes against his forces.
• Failure to overthrow the Qadhafi regime could lead to the fragmentation of Libya, with the opposition controlling the east of the country.
• The international community is enforcing a no-fly zone aimed at protecting civilians and has imposed extensive sanctions on the regime. It is likely that foreign involvement in Libya will be long term.
• Economic reform under the Qadhafi regime has been halting. We do not expect any further liberalisation until a new regime is in place. The opposition has said that it will seek to establish effective economic institutions.
• We forecast that the Libyan economy will contract by 24.6% in 2011 as a result of a steep fall in oil production and exports. Oil output is likely to rise gradually once the political situation stabilises.
• Falling oil output will result in a fiscal deficit of 25.4% in 2011. The effects of lower exports will be mitigated by higher oil prices on the back of widespread unrest in the Middle East.

Monthly review

• The UN Security Council voted in mid-March to impose a no-fly zone over Libya. Resolution 1973 authorises "all necessary measures" to protect civilians.
• A NATO-led force has launched air strikes against Colonel Qadhafi's forces. However, the ill-equipped opposition has been unable to take advantage of this action.
• The opposition's interim government has established the Central Bank of Benghazi and the Libyan Oil Company, distancing themselves from the Qadhafi regime's institutions in Tripoli.
• Qatar Petroleum has offered to market oil on behalf of the opposition in the east of the country. The first shipment was due to leave Marsa el-Hariga near Tobruk in the first week of April.
• Italy's Eni, the largest foreign oil and gas operator in Libya, has contacted the opposition leadership in Benghazi, most likely in an effort to secure its future position in the country.