Libyan real GDP growth will increase from an estimated 4% in 2009 to 4.6% in 2010 as OPEC production quotas are lifted. The global economic recovery is expected to slow in 2011 and we therefore only expect a small increase in growth to 4.7%. The non-oil sector is also set to grow rapidly, albeit from a low base, supported by government infrastructure investment programmes, particularly in the construction, utilities and transport sectors. Moves to raise the proportion of locals in the workforce could further stimulate greater private consumption and help to kick-start private-sector economic activity along with the acceleration in bank lending to the private sector.
The Libyan economy will nevertheless continue to be dependent on the hydrocarbons sector for future expansion. Development work and new oil exploration will move forward slowly in an attempt to boost production capacity, although export volumes will remain well below 2008 levels in the short term owing to lower demand growth and OPEC production quotas. Investment and imports related to oil and gas developments will therefore grow to some extent in 2010-11, provided that international oil companies are not significantly deterred by the recent threats to nationalise foreign oil operations or subsequent regulations that aim to give the Libyan government greater control over the development of hydrocarbons assets. There is also strong foreign interest in the broader investment opportunities that Libya offers, although the slowness and unpredictability of economic reform will dampen the enthusiasm of international investors.