- North Africa
- West Africa
- East Africa
- Central Africa
- Southern Africa
- Non-Regional Member Countries
You are here
Libya Economic Outlook
Key macroeconomic indicators remain volatile. They are determined by oil production, which is lackluster and uneven due to insecurity, unstable politics, poor infrastructure, and constrained government fiscal spending. In June 2018, following an attack on oil fields and the main terminals, production plummeted from almost 1 million barrels a day to 400,000. In October and November, as turmoil receded, oil production increased to around 900,000 barrels a day, but renewed tension in December further disturbed it, and some damaged infrastructure has not been fully rebuilt. Consequently, real GDP growth in 2018 did not repeat 2017’s, though it remained considerable at an estimated 10.9%.
Inflation— a cumulative 80% over the past few years— reflects the lack of goods and services and the existence of a parallel exchange market driven by foreign currency availability. Inflation fell to an estimated 13.1% in 2018 from 28.5% in 2017 due to the appreciation of the dinar on the parallel market because of increased hard currency supply. But fiscal spending could not reduce economic hardship caused by inflation because the bulk of it went to security, while 24.5% went to salaries, 6.6% to subsidies, and only 4.7% to development. Thanks to increased oil revenue due to rising oil prices in 2018, the fiscal deficit fell to an estimated 4.2% of GDP from 43.2% in 2017 and 113% in 2016.
The current account balance remained in surplus in 2018, at an estimated 1.5% of GDP, much lower than the 8.4% in 2017. Imports continued to decrease in the first quarter of 2018 due to import restrictions. Tailwinds and headwinds
GDP growth is projected to be 10.8% in 2019 but 1.4% in 2020. Despite the political situation, the government approved an economic reform program in September 2018 under which fuel subsidies will fall and the dinar will be devalued to eliminate the sizable differential between the official and parallel market exchange rates.
In 2017, Libya had the second largest foreign exchange reserves in Africa— an estimated $79.4 billion. They have fallen from their 2012 peak of about $124 billion but rebounded from a lower level in 2016 thanks to a better oil sector and the country’s fiscal stance. If Libya produces more than 1 million barrels of crude oil a day, the government will have enough resources in 2019 to devise a diversified economic and social recovery plan.
In 2018, as Libya suffered from its political crisis, the humanitarian situation continued to worsen, with an estimated 1.1 million people in need of life-saving assistance and protection, according to the January 2018 humanitarian bulletin of the United Nations Support Mission in Libya. The elections planned for 2018 were postponed again, to 2019, due to the security situation.
Lack of capacity and coordination in the public sector impedes effective and efficient governance, and public institutions lack technical expertise and a strategic framework for planning. The country remains on the list of fragile states. It needs more stable institutions to address its most pressing challenges, including high unemployment, low human capital, and the lack of water, electricity, and infrastructure.