Country Report Libya May 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 2.9% in 2009, owing to lower oil prices, OPEC output cuts and global economic conditions, before recovering to 4.8% in 2010 with accumulated oil revenues 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.
• 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 7.9% of GDP, as prices and output rebound.

Monthly review

• Libya has sued the Swiss government over its treatment of Colonel Qadhafi's son, Hannibal, and his wife.
• Libya has blocked a UN statement designed to encourage the more rigorous enforcement of an arms exports ban on Iran.
• Mr Megrahi, the Libyan official convicted of carrying out the Lockerbie bombings and imprisoned in Scotland, is likely to be transferred back to Libya to serve out his remaining sentence following the ratification of a UK law.
• Libyan Foreign Bank is looking to expand its overseas acquisitions tenfold in the near future.
• Labour regulations are jeopardising oil production, while gas exports are threatened by a lack of investment and rising domestic consumption.
• The latest money supply and price data show easing inflationary pressures and confirm links between falling oil prices, lower money supply growth and reduced inflation making government policy ineffectual.

This report covers the following industry codes:
SIC Code: 48;10;15
NAICS Code: 517;212;23