Liberia Economic Outlook
- Weak commodity prices continue to weigh on Liberia’s economy, which contracted by an estimated 0.5% in 2016. Economic growth is expected to strengthen in the medium term, reaching around 4% in 2017.
- The government faces the challenge of staying focused on development priorities during an election year, while also contending with weak growth weighing on revenues, limited borrowing capacity, and added expenditure pressures linked to security and the election.
- The government is pursuing a number of measures to help diversify the economy, increase productivity and entrepreneurship, and encourage value addition and investment in the agriculture sector.
Liberia continues to grapple with lower commodity prices, which have led to a third straight year of near-zero growth in 2016. The economy contracted by an estimated 0.5% in 2016. With limited growth expected in the iron ore and rubber sectors in the coming years, the government seeks to diversify the economy by increasing productivity in the agriculture sector. The economy can expect an uptick in growth to around 4.0% in 2017, largely due to increased production of gold and iron ore, investment projects, and agriculture expansion. Nonetheless, growth is expected to remain below previous levels into the medium term.
Fiscal policy continues to be strained by low growth and is facing further pressures due to election and security expenditure. With the withdrawal of the United Nations peacekeeping force, the government is taking on full security responsibilities. Combined with the elections in October 2017, this could increase uncertainty. Growth in public revenue has been low and borrowing space has tightened, so the government faces a delicate task, in an election year, in balancing expenditure and borrowing with development priorities. It is also critical to maintain momentum in public financial management (PFM) reforms into a new administration.
Investments in power generation and electricity access are gradually coming online, which should begin to gradually alleviate a significant constraint to the business environment. However, increasing capacity in the energy sector will be critical for sustainability and further improvements. Moreover, several key transportation corridors have been paved. These improvements notwithstanding, the business environment, which ranks very low in international comparisons, continues to impede competition, productivity and growth. The government has started work on addressing business environment constraints, attracting investment, and improving value addition in key agricultural value chains. Further efforts will be needed to raise incomes and address Liberia’s 54% poverty rate.