- GDP contracted by 6.0% in 2015 but in the event of a resolution to conflict and a rapid resumption of oil production, economic growth could recover quickly.
- Prospects for a unity government have improved, although the coastal cities of Sirte and Derna remain controlled by the Islamic State.
- The urban policies adopted in the 1970s have had positive effects on structural transformation, in particular with the impulse of the industrial dynamism of cities like Tobruk, Misrata, Zawya, Al Bayda and Derna.
Following months of delay, Libya’s House of Representatives (HoR) was elected in June 2014, replacing the General National Congress (GNC), which had acted as Libya’s legislative body since July 2012. The election of HoR was disputed by the Islamist factions who subsequently reconvened the GNC in Tripoli in August. Consequently, there are currently two rival governments in Libya: one linked to the HoR, the internationally recognised government, the other to the GNC, indicating the depth of administrative and bureaucratic chaos in the country.
The United Nations and humanitarian partners estimate that 4.35 million people, almost half the population, have been affected by the armed conflict. Political divisions and the intense fighting between rival militias since August 2014 have cost hundreds lives, and displaced over 435 000 people. Most of the displaced are living in urban centres within host communities, with just over 100 000 living in collective centres in the open or in makeshift buildings such as schools and empty warehouses. The largest number of displaced are located in Benghazi, Al Jabal Al GhaRbi, Al Zawiya, Tripoli and Misrata. The conflict has also caused serious damage in terms of provision of and access to basic goods and services, especially health care, food, shelter, clean water and sanitation and education in Tripoli and across the country.
The poor political and security situation has had serious consequences for the economy, public finance and official reserves in 2015. The continuing clashes between tribal and militia associated with different political factions around the oil sites have steadily reduced oil production and exports by almost two-thirds, compared to pre-crisis levels. An average of 400 000 barrels per day (bpd) were produced in 2015 and 1.8 million bpd in 2010. As a result, GDP contracted by an estimated 6.0% in 2015, against a contraction of 23.5% in 2014, and is projected to show a decline of 0.8% in 2016 if the security situation does not improve.
After several attempts, international efforts to forge a consensual roadmap succeeded in December 2015 when the factions agreed on a national unity government deal at an UN-facilitated meeting in Tunisia. A Government of National Accord (GNA) was announced on 19 January 2016, and 32 ministers were proposed. However, the HoR parliament rejected the UN-backed unity government because it included too many ministers and asked the Tunis-based Presidential Council to propose a new, shorter list of ministers within 10 days. A revised and shorter list was presented on 15 February but, by the end of the month, agreement had still not been reached.
The economic situation in 2016 will largely depend on the implementation of the Government of National Accord and the extent of security stabilisation. In this context, the economic recovery will proceed slowly, especially in the oil sector. In 2017, the implementation of an important reforms programme could release substantial growth potential and significant improvements in both the budget and current balances. This would stabilise Libya’s official reserves and help create a climate of trust and confidence for potential investors.