Population 6.608 million
GDP 85.109 US$ billion
@rating
country
Business climate
assessment
| 2010 | 2011 | 2012(e) | 2013(f) | |
|---|---|---|---|---|
|
GDP growth (%)
|
4.3 |
-62 |
120 |
17 |
|
Inflation (yearly average) (%)
|
2.5 |
16 |
10 |
1.5 |
|
Budget balance (% GDP)
|
9 |
-15.5 |
9 |
4 |
|
Current account balance (% GDP)
|
20 |
2 |
28 |
20 |
|
Public debt (% GDP)
|
3 |
5 |
2 |
2.5 |
| (e) Estimate (f) Forecast | ||||
STRENGTHS
- Extensive reserves of oil and gas
- Comfortable financial situation
- Tourist potential linked to archaeological heritage
WEAKNESSES
- Poorly diversified economy, dependent on hydrocarbons, with infrastructures needing reconstruction
- Inadequate education and training levels, hence dependence on foreign workforce
- Uncertain political transition and security problems
- Very difficult business environment
- Inadequate modernisation of the economy and the banking sector
Risk assessment
Laborious political transition and still problematic security situation
After the fall, in late August 2011, of Colonel Gaddafi’s regime, in power since 1969, the National Transitional Council drafted a provisional constitution setting out the roadmap for political transition. In the elections for the General National Congress (interim parliament) in July 2012, 120 of the 200 seats went to individual candidates, and among the parties, the (liberal-leaning) National Forces Alliance of Mahmoud Jibril prevailed over the Islamist Party of Justice and Reconstruction, linked to the Muslim Brotherhood. A government integrating all the components of Libyan society was formed only in November 2012 with the diplomat, Ali Zeidan as Prime Minister. Moreover, the formation of a 60- member assembly charged with preparing the new constitution is planned, with seats being shared equally between Tripolitania in the west, Cyrenaica in the east and Fezzan in the south. All stages of transition process are, however, taking longer than foreseen and the process is expected to last until parliamentary elections are held, at the earliest at the end of 2013.
Whether these go well, in a country without democratic experience and prone to insecurity, will depend particularly on the successful integration of opposing factions, some related to membership of a tribe or region, others to western-style political liberalism or to Islamism.
The government also aims to create a unified army, since the civil war has led to the creation of many regional militias. After the death of the American Ambassador in Libya on 11 September 2012, during an attack on the Benghazi consulate attributed to radical Islamists, fighting insecurity is a priority for the authorities. Another major challenge is the rapid restoration of basic state services to meet the population’s needs.
Return to a less exceptional pace of growth in 2013
Growth rallied spectacularly in 2012 as Libya succeeded in raising oil production to near pre-civil war levels much faster than predicted. With a hydrocarbon sector representing 70% of GDP, activity is expected to remain very sustained in 2013, though at a less exceptional pace. However, while international firms manage a substantial proportion of hydrocarbon exploitation, additional foreign capital and staff are necessary to increase production, but this will partly depend on the political and security situation. Excluding hydrocarbons, reconstruction will also boost growth.
Consolidation of public and external account surpluses
Hydrocarbons account for about 90% of fiscal revenues and 95% of exports. In 2013 the production and export of hydrocarbons are likely to exceed pre-conflict levels due to ongoing normalisation of the political and security situation.
However, the fiscal surplus will be eaten into by the cost of the country’s reconstruction and the emphasis put on the development of public investment and job creation.
Likewise, the large current account surplus will be eroded by the purchase of capital goods linked to reconstruction and the relaunch of big infrastructure projects.
Meanwhile, after the lifting of international sanctions and with the release of frozen foreign assets of the Libyan Investment Authority’s (LIA) sovereign fund, total Libyan assets (official reserves and LIA funds) could climb to the equivalent of five years’ exports and three times GDP by the end of 2013. This strongly consolidates Libya’s external financial position, even though many of the LIA’s funds are not very liquid or difficult to recover.
Very problematic business environment expected to improve
Improvement in the business environment has not been possible since the fall of the previous regime and business remains very difficult due to regulatory uncertainty and administrative inefficiency. Moreover, in the current period of political transition, the problems of transparency and corruption are exacerbated.
In this context, establishing credible new institutions will not be easy. The new government is expected to bring forward the rule of law and reforms allowing the private sector to function more efficiently, even though it has not yet defined its policy in this regard.
Before all these problems are resolved, payment delays and debt collection difficulties can be expected.
