Significant rainfall in Chad at the start of the 2010 wet season (July-October) has boosted the outlook for agriculture in 2011. This sector contributed nearly 12% of GDP in 2007, according to the IMF, but has suffered greatly of late from drought and the continued civil conflict. Improved crop and livestock production is expected to more than offset the damage caused by localised flooding. Furthermore, record high global cotton prices will stimulate production of this cash crop.

Government spending on infrastructure will continue to rise quickly in 2011-12, boosting the contribution of construction to growth. Despite picking up slightly in the first half of 2010 to 120,000 barrels/day (b/d), oil production from the Doba fields is expected to dwindle in 2011-12, as the operator, EssoChad, has found it increasingly difficult to extract oil, given the country's challenging geology. Meanwhile, the Chinese National Petroleum Corporation (CNPC) continues its exploration and construction programme in the Ronier field in the Bongor Basin, north of Doba, which is expected to yield 60,000 b/d once completed. CNPC has continued to insist that oil will come on stream by 2011, although delays are possible and it will take some time to reach full output. It is also unclear how the extra oil output is to be exported. Nonetheless, we have provisionally raised our forecast for the country's total oil output to 125,000 b/d in 2011 and 130,000 b/d in 2012.

Apart from the oil sector, the contribution to economic growth of industry-which comprises the manufacture of basic goods such as soap, cigarettes, sugar and some textiles-will remain small, at around 7% of GDP. However, a Chinese cement factory and various new Indian-financed ventures, including a vehicle assembly plant and a textile factory, may stabilise the industrial contribution to growth in 2011-12. Constraints to larger-scale industrialisation, including small market size, low credit availability and the lack of skilled labour and infrastructure, will persist in the forecast period. Infrastructural improvements are a priority area for government spending, and extensive road-building will boost growth in both the short and long terms.

Services, which account for around 40% of economic output (including government services), will experience some growth in 2011-12, led by telecommunications and banking, which will continue to attract foreign investment, particularly from Nigeria. Transport, which is a priority sector for improvement under the PRGS for 2008-11, will receive a boost from the government's road-building programme. In view of these trends-and particularly extra activity in the oil sector and public works-we now forecast that real GDP will grow by 5.5% in 2011 (4.5% previously), accelerating to 6% in 2012 (4% previously).