Libya Economic Outlook

In 2022, real GDP contracted sharply, by 12.1%, after growing 28.3% in 2021. The recession was driven by rising conflict and lower performance of hydrocarbon, services, and, to a lesser extent, manufacturing. Inflation increased to 4.6% in 2022 from 2.8% in 2021, following the rise in prices of food and essential goods. As of January 2023, no agreement had been reached on unifying the Central Bank of Libya with its Eastern branch, affecting the country’s monetary policy and banking system. The fiscal surplus rose to 13.8% of GDP in 2022 from 11.3% in 2021, due mainly to higher oil revenue. In 2022, spending also increased, driven mainly by higher spending on salaries and an extraordinary budget outlay for the National Oil Corporation to fund operations and investments.

The current account surplus remained in 2022 but dropped nearly 5 percentage points from 2021, reflecting volatility in oil exports. Public debt is domestic and estimated at $33 billion in 2021, or 83% of GDP. Political turmoil has affected the banking system’s operating environment and performance, while the liquidity crisis persists. Domestic credit to the private sector represented 16.6% of GDP in 2020. In 2022, 2% of the population was multidimensionally poor, and 11.4% was vulnerable to becoming multidimensionally poor. About 800,000 people in need require humanitarian assistance. The unemployment rate reached 19.6% in 2022, and acute food insecurity continues to escalate.

Outlook and risks

Real GDP is projected to grow 17.9% in 2023, reflecting a base effect, and 8.0% in 2024, buoyed by hydrocarbon sector recovery and high oil prices. Inflation is projected to remain under control, at 4.5% in 2023 and 4.6% in 2024. The fiscal balance is projected to post a surplus of 18.8%–22.1% of GDP in the short term due to high oil revenue. Continuing oil sector recovery is projected to boost exports more than imports—which may boost the current account surplus, projected to reach 24.5% of GDP in 2023—and to result in a large accumulation of foreign reserves. Headwinds include increased political instability and conflicts, leading to an oil blockade and additional humanitarian needs. On the global side, tighter financial conditions could further slow global economic growth, reducing oil demand.

Climate change issues and policy options

Libya has elaborated neither a national climate change strategy nor a National Determined Contribution. The potential of the domestic private sector to close the climate finance gap remains very low, following prolonged conflict and macroeconomic uncertainty. Although international private financing could be an alternative, it depends heavily on stabilizing the political situation. Over 2010–20, Libya received $328.2 million in climate finance, mainly from the Global Environment Facility and the Green Climate Fund. In 2019–20, 94% of climate finance in the country, or $44 million, was from the private sector. Attracting private climate finance requires appropriate regulatory policies and investment incentives. Libya is well endowed with hydrocarbon resources, holding 3% of the world’s proven crude oil reserves at the end of 2021, the largest endowment in Africa (39% of the continent’s total) and the ninth largest globally. In 2021, Libya was the third largest producer of crude oil in Africa, after Nigeria and Algeria. Only 25% of Libya’s territory has been explored for hydrocarbons. The country also holds important untapped mineral resources such as iron ore, limestone, magnesium salts, potassium salts, gold, and uranium, in addition to phosphate and silica deposits.

Source: African Economic Outlook (AEO) 2023