Authors : Yasmine Eita
Economic growth contracted by 8.1% in 2016. However, the projected real GDP growth rate is estimated at -4.9% and -3.0% in 2017 and 2018, respectively, due to the projected rise in oil prices and the anticipated recovery of the crude-oil production to around 900 000 barrels per day (bpd) in 2017 and 2018 from under 400 000 bpd in 2016.
In mid-December 2015, the Libyan Political Agreement (LPA) was signed in an attempt to end the political crisis that has been dragging on since the summer of 2014. The LPA led to the formation of a Presidential Council (PC) at the head of an interim Government of National Accord (GNA) in Tripoli. However, the cabinet proposed by the GNA failed to be approved in the House of Representatives (HoR), based in Tobruk. Consequently, political and security instability in Libya have continued to affect the economy. A considerable decrease in oil production and a high degree of volatility in oil prices have affected both the current account and budget revenue. Contrary to previous years, the 2016 budget was not approved. According to recent updates, the GNA and the Central Bank of Libya (CBL) agreed on a 2017 emergency budget that has, however, been rejected by the HoR. Yet, to control expenditure amidst reduced oil revenues, the CBL continues to disburse funds only for wages and essential subsidies, while unemployment remains high, reaching 19.2 % in 2016.
Plans to implement industrial and entrepreneurship strategies have failed. Limited institutional co-ordination within the Libyan public sector and a fall in oil revenues have negatively affected government revenue collection, hampered budget revenues and fiscal management and delayed efforts and projects to diversify the economy away from the oil sector towards more general industrialisation.
The economic outlook in 2017 and 2018 largely depends on political unity and the extent of improvements in security. On the assumption that progress will be achieved, the economy will recover slowly, especially in the oil sector. Prospects also hinge on the outcome of efforts to diversify the economy. Significant reform programmes, enhanced ability to mobilise external resources and diversification of the economy could – if conditions allow – release growth potential and produce important economic changes for Libya.
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