Country Report Libya

Outlook for 2008-09

• Political power will remain vested in the Libyan leader, Colonel Muammar Qadhafi. Libya will retain its unique jamahiriya (republic of the people) system, and there is no prospect of real political liberalisation.
• Having positioned himself as the country's leading reformist, and having won the ear of Colonel Qadhafi, Saif al-Islam Qadhafi is best-placed to succeed his father, despite official denials that he is being groomed for the leadership role.
• Relations with the US and the EU have returned to normal since the lifting of international sanctions on Libya. The diplomatic rapprochement will draw much-needed foreign investment into the stricken state-controlled economy.
• The hydrocarbons industry will continue to underpin future economic growth, although the authorities are pushing for greater diversification.
• We expect Libya's real GDP to grow by 7.3% in 2008 and 7.6% in 2009, owing to a strong rise in export revenue, which should boost both public and private consumption.
• Libya's consumer price inflation is forecast to average 9.4% a year in 2008-09, following heavy increases in housing and food prices.
• Strong export revenue on the back of rising oil production and record high oil prices will ensure that Libya's current account records a surplus in 2008-09, ending the outlook period at a massive 47% of GDP.

Monthly review

• The Libyan leader launched a vitriolic attack against the EU's policy with respect to illegal migrants from Africa, but his tirade was implicitly directed against the appointment of a controversial Italian cabinet minister.
• The Libyan authorities have dispatched more peace monitors to the Philippines to help to maintain a ceasefire between the Philippine government and a rebel group.
• New measures were announced in mid-May designed to improve the efficiency of Libyan banks. The measures will provide further momentum for the country's banking reform process.
• Colonel Qadhafi's call for the scrapping of most ministries has had a direct bearing on development projects, with some payments to contractors not being met owing to confusion over ministerial responsibilities.
• Lower domestic consumption and rising international oil prices significantly boosted Libya's oil revenue in 2007.
• The formation of a new Libya-UAE holding company in May provided yet more evidence of strengthening investment ties between the two countries.

SOURCE: Country Report