Authors

Overview

Recent Developments & Prospects

Macroeconomic Policy

Fiscal Policy

Monetary Policy

Economic Cooperation, Regional Integration & Trade

Debt Policy

Economic & Political Governance

Private Sector

Financial Sector

Public Sector Management, Institutions & Reform

Natural Resource Management & Environment

Political Context

Social Context & Human Development

Building Human Resources

Poverty Reduction, Social Protection & Labour

Gender Equality

Thematic analysis: Structural transformation and natural resources

Author: Sahar Taghdisi Rad

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  • Libya recorded an economic downturn in the second half of 2013, mainly due to disruptions to oil production caused by the mounting protests at the country’s major oilfields and export terminals. Oil production should gradually resume and boost GDP growth in 2014/15.
  • Regional and tribal factions, as well as expanding militia activities, pose an increasing challenge to the authorities and their management of strategic hydrocarbon earnings, as well as diverting attention away from constitutional and socio-economic reforms.
  • Participation in global value chains is hampered by lack of diversification, a poorly developed private sector, infrastructure limitations and the regulatory environment.

Following rapid economic recovery in 2012, based on the resumption of hydrocarbon production and exports after Libya’s 2011 civil war, the economy faced major challenges in 2013. During the second half of the year, mounting protests and shut downs at major oilfields and export terminals resulted in oil production’s declining to well below its long-term average of 1.6 million barrels per day (bpd). Production levels reached as low as 200 000-300 000 bpd in October 2013. With income from hydrocarbon sales constituting over 95% of government revenues, this has resulted in substantial budgetary pressure. According to the Libyan Ministry of Economy, the oil blockades cost the Libyan economy over USD 10 billion in 2013. As a result, GDP declined sharply in 2013 but is expected to rebound during 2014/15, on condition that the security situation and, in particular, the incidents at the oil terminals do not worsen compared to 2013.

Fiscal sustainability could be an important challenge in 2014 if the disruptions to oil production continue, especially in light of the government’s commitment to increasing the salaries of public-sector workers by 20% from early 2014. The government’s fiscal stability, which has been threatened as a result of these trends, is not only essential for an effective and rapid economic transition, but also for its ability to exert effective political control across the country and to ensure a smooth political transition.

The collapse of Gadhafi’s regime in Libya has opened up space for new regional tensions over greater economic power and political representation, with hydrocarbon resources often used as a bargaining chip. There have been severe tensions surrounding the possible relocation of the headquarters of the National Oil Corporation (NOC) from Tripoli to Benghazi. In recent months a spate of protests by staff and militias at key oilfields and export terminals across the country has resulted in drastic declines in oil production and exports. Some of the militia groups operating under the umbrella of various government ministries have resorted to force to ensure their agendas are followed and their interests are protected, resulting in a number of security incidents often concentrated in the east of the country and targeting high-level state officials, civilians and international/diplomatic entities.

Table 1: Macroeconomic indicators

 20122013(e)2014(p)2015(p)
Real GDP growth104.4-12.14.322.4
Real GDP per capita growth103.5-12.83.421.4
CPI inflation6.13.77.55.4
Budget balance % GDP13.8-9.3-13.20.4
Current account balance % GDP25.52-0.59.8

Source: Data from domestic authorities; estimates (e) and projections (p) based on authors’ calculations.

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