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libya




  
GDP (current US$)$41.12 billion2014
Population, total6.259 million2014
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 Overview
The United Nations (UN) is seeking to bring the House of Representative and General National Congress together at the negotiating table to reach a deal to end the conflict that erupted following last summer’s legislative elections. The UN is urging the two sides to reach an agreement on a coalition government whose highest priorities would be restoring services and the confidence of citizens, as well as combatting terrorism which has increasingly become a threat to the political transition process and the security and stability of the country and the region.

In this context of political instability, the process of drafting a new constitution has been significantly delayed. In addition, there has been no progress in formulating a strategy to stimulate the non-oil economy and put in place the building blocks for sustainable, diversified, private sector-led economic growth.

Internal political and armed conflict that disrupted oil production and exports was exacerbated by the steep decline in the global oil prices, all of which have driven the Libyan economy into recession since 2013. A series of strikes and security breaches at oil sites have significantly disrupted activity in the domestic hydrocarbon sector. Libyan oil production dropped to an average of 0.5 million bpd in 2014 (down from 1 million bpd in 2013 and a potential 1.6 million bpd). As a result, real GDP is estimated to have contracted by 24 percent in 2014, following a 13.6 percent drop recorded in 2013. The economic recession over two consecutive years cut nominal GDP by half (US$ 82 billion in 2012 and US$ 41.2 billion in 2014) as did income per capita (from US$ 12,800 in 2012 to US$ 6,600 in 2014). The real economy continued to suffer in 2015 from disruptions to the oil sector. However, thanks to very low production in 2014-H1, oil production increased by 30 percent over the first 7 months of 2015 to an average 0.41 million bpd. This production level represents a fourth only of the potential 1.6 million bpd. As a result, GDP is estimated to rise by 2.9 percent in 2015. Despite the broad consumer price subsidy system, inflation jumped by 7.6 percent over the first quarter 2015 mostly driven by higher prices of food (up 14.3 percent).

Renewed internal strife has put enormous stress on the government budget and the external stance. Reflecting mostly the collapse in oil export revenues, total revenues dropped by 61 percent in 2014 (from LYD 54.8 billion in 2013 to less than LYD 21.4 billion in 2014). On the expenditure side, the high wage bill and significant subsidies represent 69 percent of GDP (LYD 36 billion out of LYD 44 billion total expenditures). Both HoR and GNC have recently proposed budgets calling for a reduction in fuel and other subsidies. Further, both political administrations have proposed reducing the wage bill by approximately 18% from FY2013’s Libyan dinar 22 billion. At the same time, capital (development) spending has fallen to a fifth of its pre-revolution level. Reflecting these adverse developments, the government ran a significant budget deficit estimated at 43.5 percent of GDP in 2014 (LYD 22.8 billion), the highest ever recorded. The political crisis also took a toll on exports, while consumption driven imports remained high. The large current account surplus recorded in 2012 (29 percent of GDP) was more than halved in 2013, before turning into a large deficit of 32.8 percent of GDP in 2014.

Short term economic prospects are based on the assumption that parties to the conflict will reach a political agreement later this year under the auspices of the UN, allowing the formation of a Government of National Accord and security stabilization. In this context, economic recovery will proceed slowly but steadily, especially in the oil sector. Over the medium term, a fast pace of stabilization and reform would release substantial growth potential. Both the budget and current account balances will significantly improve, eventually turning into surpluses, allowing foreign reserves to stabilize. Immediate challenges are to manage fiscal spending pressures without compromising the need for rapid restoration and improvements in basic services and infrastructure.

A longer term goal is to help develop the framework and institutions for a more diversified market-based economy, broadening the economic base beyond the oil and gas sector. Although the Bank’s post-conflict engagement was initially expected to accompany only Libya’s short term economic recovery efforts, the transition program will lay the foundation for longer term goals. This includes creating a more vibrant and competitive economy with a level playing field for the private sector to create sustainable jobs and wealth. It also includes transforming the management of oil revenues to ensure they are used in the best interests of the country and to the benefit of all citizens equally. This will also ensure that citizens have a role in defining and voicing their communities’ best interests.

Source: World Bank
Updated: September 2015

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