Real growth should continue to accelerate in 2011, to 4.1%, from an estimated 3.9% in 2010. However, despite a recovery in agriculture, construction, services and exports, worsening power cuts and higher imports have led us to lower our forecast from 4.3%. Stronger agricultural output will be driven by increased government investment in the horticultural subsector, despite the withdrawal of some government marketing subsidies. Industrial production should rise in 2011-12 despite power supply problems, and phosphates output continues to recover. Services should grow well, led by banking and the mobile-phone subsector. Domestic demand will improve in 2011 as private consumption accelerates and government spending rises ahead of the 2012 elections, supporting real GDP growth of 4.5% in 2012. Deepening ties with China will also boost growth and investment.

Chronic power shortages are the key risk to growth potential in the commercial and industrial sectors. Despite stronger policy direction from the government, progress on increasing power-generation and oil-refining capacity will be slow. Improving the perceptions of corruption and streamlining the bureaucratic business environment will be fundamental to encouraging foreign direct investment.