Outlook for 2011-15

• Political power will remain vested in the Libyan leader, Muammar Qadhafi. Libya will retain its unique jamahiriya (republic of the people) system, but the structures of government will undergo halting reform.
• There are signs that the regime fears contagion from political events in neighbouring countries. It will adopt measures to prevent or suppress any domestic uprisings.
• Popular demonstrations against dynastic succession in Egypt are likely to influence Colonel Qadhafi's plans to hand over power to one of his sons. Saif al-Islam Qadhafi has long been considered his most likely successor.
• Relations with the US and the EU will be subject to periodic bouts of tension, despite the resolution of the Lockerbie affair and the scrapping of Libya's weapons of mass destruction programme.
• The hydrocarbons sector will dominate the economy, but non-oil growth will be strong. However, the government's inconsistent and unwelcoming policies risk deterring international oil companies and other investors.
• We forecast that real GDP growth will average 3.8% in 2011-15. Oil output is likely to rise modestly alongside strong growth in the non-oil sector.
• In line with international food and non-oil commodity prices, inflation will spike in 2011, reaching 4%, before flattening out at an average of 3% in 2012-15.
• The current account will reflect trends in international oil prices, which determine export values. The surplus will widen to 24.2% of GDP in 2011, before narrowing to 12.1% of GDP in 2015.

Monthly review

• Colonel Qadhafi has condemned the popular uprising in Tunisia, expressing his support for the former president, Zine el-Abidine Ben Ali.
• Fearing a possible spillover from Tunisia, Colonel Qadhafi formed a crisis management team and removed taxes on food products. Meanwhile, protestors occupied homes under construction in Bani Walid and Benghazi.
• The US has recalled its ambassador to Washington after US embassy cables referring to Colonel Qadhafi, which were released by WikiLeaks, a whistle-blowing website, compromised his position in Libya.
• Libya's Privatisation and Investment Board has announced that the initial public offerings of Libya's two telecommunications companies, Libyana and Al Madar, will go ahead before the end of April.
• Government deposits in Libyan banks amounted to LD78.6bn (US$62.2bn) in the third quarter, the equivalent of 99% of GDP.