Country Report Libya February 2009

Outlook for 2009-10

• 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 government structure will undergo slow, piecemeal reform.
• 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 his announced intention to quit active political life.
• Relations with the US and the EU have returned to a normal footing since the lifting of international sanctions on Libya and the compensation payments for sponsoring terrorism, bringing much-needed investment.
• The hydrocarbons industry will continue to underpin future economic growth, although the authorities will push for diversification while possibly deterring international oil companies by inconsistent policy.
• The Economist Intelligence Unit expects Libya's real GDP growth rate to fall to 4.2% in 2009, owing to lower oil prices, OPEC oil output cuts and the effects of the global economic downturn, before recovering to 5.4% in 2010.
• We expect inflation to fall to an average of 8.6% over the outlook period, as international oil and non-oil commodity prices, particularly for food, decline.
• A sharp fall in global oil prices and a Libyan oil output cut will push the current account into deficit in 2009. In 2010, however, it is forecast to return to a surplus of 8% of GDP, as both factors rebound.

Monthly review

• Libya and the US have begun tentative military co-operation based on their shared fear of the dangers posed by al-Qaida-affiliated groups in North Africa. Russia is also looking to establish a naval base in the country.
• The government has continued its strong rhetoric against Israel's recent military assault on Gaza, declaring the Union for the Mediterranean initiative of the French president, Nicolas Sarkozy, dead owing to Israel's involvement.
• Colonel Qadhafi has threatened to nationalise foreign oil operations in the country to exert greater control over production and price. The National Oil Corporation (NOC) has pledged to cut output beyond OPEC demands.
• The NOC is re-examining the terms of hydrocarbons contracts with international oil companies with a view to securing higher revenue, in a move seen as unwise given falling prices and the need for foreign investment.
• Annual average inflation in 2008 reached 10.4%, according to full-year government figures, but fell slightly during the second half of the year owing to lower global commodity prices.

Source: Country Report

This report covers the following industry codes:
SIC Code: 37;53;49;60;2834;80;48
NAICS Code: 336;44;22;52;3254;62;517