Country Report Libya November 2008

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, although the existing government structure will be replaced.
• 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 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.
• The Economist Intelligence Unit expects Libya's real GDP growth to fall to 5.1% in 2009, owing to OPEC oil output cuts and the global economic downturn, before recovering to 6.1% in 2010, as domestic demand remains strong.
• We expect average inflation to fall to an average of 8.2% over the outlook period, as international oil and non-oil commodity prices decline.
• Weakening global oil prices and output cuts will cause the current-account surplus to narrow to an average of around 17% of GDP a year in 2009-10.

Monthly review

• Libya has paid the full sum of US$1.5bn into a fund to compensate the victims of two attacks linked to Libyan-backed terrorist cells in the 1980s, which should allow a US ambassador to be sent to the country.
• The official Libyan news agency, JANA, has announced that Libya will halt all oil supplies to Switzerland and withdraw all of its funds from Swiss banks.
• Colonel Qadhafi has undertaken his first visit to Russia for more than 20 years, with the avowed intent of restoring world "geopolitical equilibrium", and in order to finalise arms purchase agreements.
• Libya's sovereign wealth fund, the Libyan Investment Authority (LIA), has sought to diversify its investment portfolio during the global credit crunch. In concert with the Libyan Foreign Bank, it increased its stake in Italy's Unicredit.
• Shokri Ghanem, the chairman of the Libyan National Oil Corporation (NOC), has backed large OPEC production cuts in order to support oil prices.
• The Libyan state Economic and Social Development Fund (ESDF) has signed a joint-venture deal with Russia's United Company RUSAL to build Libya's first aluminium smelter.

Source: Country Report

This report covers the following industry codes:
SIC Code: 13;49
NAICS Code: 211;22