A steady increase in oil output will drive real GDP growth prospects over the forecast period. We forecast that crude output will rise from an estimated average of 1.78m barrels/day (b/d) in 2010 to 2.1m b/d by 2015. However, given the history of technical delays in the oil sector and the possibility that OPEC may try to enforce Angola's quota more strictly, there is a risk that production will rise at a slower rate. We estimate that real GDP growth recovered weakly in 2010, to an average of 1.7%, owing to faltering oil output in the final quarter, restrained public investment and sluggish activity in the construction and services sectors, owing to the build-up of substantial domestic debt arrears. With oil production and public investment recovering strongly, along with the expected paying-down of most of the arrears, we forecast that real GDP growth will accelerate to 6.7% in 2011. The expected start-up of the US$8bn Angolan liquefied natural gas (LNG) project in 2012 should boost real GDP growth to 8.1% that year, moderating to an average of 6.6% in 2013-15.

Despite strong real GDP growth, economic expansion will remain capital-intensive and import-dependent, with few linkages to areas of the economy other than government-dominated sectors like construction and finance. Moreover, the development of a dynamic private sector will be hindered by weak human capital, a flawed judicial system, poor regulation, corruption and the crowding-out of private-sector investment by the public sector.

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