Country Report Libya April 2009

Summary

Political power will remain vested in the Libyan leader, Colonel Muammar Qadhafi. Libya will retain its unique jamahiriya (republic of the people) system, but the structures of government will undergo halting reform.
Having positioned himself as the country's leading reformist, Saif al-Islam Qadhafi remains a prominent figure, despite his 2008 claim to be quitting active political life, and is best-placed to succeed his father.
Relations with the US and EU have returned to normality since Libya agreed to pay compensation to the families of the victims of the Lockerbie bombing and sanctions on Libya were lifted, spurring two-way investment flows.
The hydrocarbons industry will continue to underpin future economic growth. However, the government's inconsistent and unwelcoming policies risk deterring international oil companies.
The Economist Intelligence Unit expects real GDP growth to fall to 2.9% in 2009, owing to lower oil prices, sharp OPEC oil output cuts and the effects of the global economic downturn, before recovering to 4.8% in 2010.
We expect inflation to fall to an average of 7.9% over the forecast period, as international oil and non-oil commodity prices, particularly for food, decline.
A sharp fall in global oil prices and a cut in Libyan oil output will push the current account into deficit in 2009. In 2010, however, the current account is forecast to record a surplus of 8.2% of GDP, as prices and output rebound.

The immediate implementation of the government's Wealth Distribution Programme has been rejected by the Basic People's Congresses and the General People's Congress, which is akin to a parliament.
A friendship treaty has been signed with Italy under which the latter will pay compensation to Libya for crimes committed during its colonial occupation. The two countries will also strengthen economic ties.
Colonel Qadhafi has once again disrupted an Arab League summit, which was held in the Qatari capital, Doha, on March 30th. His verbal attack on the king of Saudi Arabia caused the latter to walk out of the summit.
The Economist Intelligence Unit's 2008 democracy index ranks Libya 159th out of 167 countries, putting it among the 51 countries categorised as "authoritarian".
The Central Bank of Libya has announced that a third bank will be partly privatised, in a rare concrete example of the gradual liberalisation of the country's financial and banking sectors.

This report covers the following industry codes:
SIC Code: 60;2834
NAICS Code: 52;3254