Country Report Libya June 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 structures of government will undergo halting reform.
• Having positioned himself as the country's leading reformist, Saif al-Islam Qadhafi continues to play a prominent role, despite his 2008 claim to be quitting active political life, and is best-placed to succeed his father.
• Following the compensation of the families of the Lockerbie bombing victims by Libya and the cessation of its weapons of mass destruction programme, relations with the US and EU continue to be rehabilitated.
• The hydrocarbons industry will continue to underpin future economic growth. However, the government's inconsistent and unwelcoming policies risk deterring international oil companies.
• We expect real GDP growth to fall to 3.1% in 2009, owing to lower oil prices, OPEC output cuts and global economic conditions, before recovering to 4.9% in 2010 with accumulated oil revenue sustaining investment levels.
• We expect inflation to fall to an average of 8.1% over the forecast period, as international oil and non-oil commodity prices, particularly for food, decline.
• Lower average annual oil prices and a cut in Libyan oil output will cause a sharp contraction in the current-account surplus in 2009 to 4.1% of GDP. It will recover to 14.6% of GDP in 2010, as prices and output rebound.

Monthly review

• Despite ongoing arguments relating to illegal immigrants into the EU, Libya and Italy have agreed to conduct joint sea patrols to try to tackle the issue.
• Human rights in Libya have been called into question following damning reports from Amnesty International and Freedom House as well as the death in prison of two detainees, an Islamist militant and a pro-democracy dissident.
• The Libyan government has determined to lease land in Ukraine to secure food imports in return for supplying crude oil to the country.
• Recent shifts in exchange rates of the Libyan dinar against the US dollar and euro have boosted the local-currency value of oil revenue and lowered the import bill.
• Growth in government deposits and foreign-exchange reserves has continued, suggesting that the authorities have failed to spend their oil-related income effectively, undermining the potential for economic development.
• Net foreign assets have also increased as the government has expanded its acquisitions abroad.

Source: Country Report

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