Liberia Economic Outlook
- Liberia’s post-war economic growth was sustained in 2012, led by the first full year of iron ore exports, construction, and strong performance in the service sector, but these positive trends are subject to fluctuations in commodity prices, FDI, and overseas development assistance.
- President Sirleaf’s government passed its FY 2012/13 budget as part of an Open Budget Initiative, but it faces mounting pressure to increase employment, improve services, tackle corruption and address governance issues in the forestry, palm oil, and oil sectors.
- The poverty rate has decreased from 64% to 56% between 2007 and 2010, but some 78% of the population remains engaged in vulnerable employment, and Liberia ranks close to the bottom of countries in the Human Development Index (HDI) (174th out of 187).
Liberia’s post-war economic growth was sustained in 2012, with estimated real GDP growth of 8.9%, led by the first full year of post-conflict iron ore exports, buoyant construction, and strong performance in services. Real GDP is projected to expand by 7.7% in 2013 and 5.4% in 2014, supported by further iron ore expansion and concessionrelated foreign direct investment (FDI). Liberia’s economic outlook remains vulnerable to fluctuations in commodity prices, particularly for its key exports, rubber and iron ore.
Potential declines in FDI and overseas development assistance, including the partial drawdown of the substantial UNMIL force, could also affect economic performance.
Consumer price inflation moderated to 6.9% in 2012, thanks to lower international food and fuel prices, and is expected to further slow to 5.1% in 2013.
In December 2012, Liberia launched the Agenda for Transformation (AfT), its second poverty reduction strategy. The AfT intends to remove key infrastructure constraints in energy, roads, and ports, and to support youth and capacity building. The government has secured financing to rehabilitate the Mount Coffee Hydropower plant, which could come online at end of 2015 and would help address the country’s substantial energy shortage. The government prepared its FY 2012/13 budget in a three-year Medium Term Expenditure Framework (MTEF). However, despite substantial progress in public financial management (PFM) and transparency, substantial challenges remain, and pay reform will be necessary to improve public sector capacity.
Natural resources continue to play a leading role in Liberia’s economy. Iron ore, rubber, and timber dominate exports, and the oil and palm oil sectors offer much potential. The management of these resources has come under scrutiny in the past year. The abuse of Private Use Permits in the forestry sector has resulted in a quarter of Liberia’s land being contracted out to foreign companies with little oversight. Land access disputes have also slowed planting in the palm oil sector, and oil discoveries have been overshadowed by the need to reform the sector’s institutions. Investments in power and transportation should foster linkages between Liberia’s private sector and its natural resources sector, while increasing productivity and market access for the majority of households in rural areas that are engaged in small-scale agriculture. Infrastructure will take years to develop, however, and poor access to credit will continue to constrain growth. Concession agreements could create up to 100 000 local jobs over 10 years, but this will make limited impact on the 50 000 youth joining the labour force every year. Increased employment creation would help decrease the risk of instability.