Country Report Libya September 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.
• Colonel Qadhafi is likely to be succeeded by one of his sons, either Saif al-Islam Qadhafi, a reformer who is well known internationally, or Mutassim Qadhafi, who has a prominent role in national security.
• Relations with the US and EU will be subject to periodic bouts of tension, despite the resolution of the Lockerbie affair and scrapping of Libya's weapons of mass destruction programme.
• The hydrocarbons sector will dominate the economy, but non-oil growth will be strong. However, the government's inconsistent and unwelcoming policies risk deterring international oil companies and other investors.
• We expect real GDP growth to fall to 4% in 2009, owing to lower oil prices, OPEC output cuts and global economic conditions, before recovering to 5.1% in 2010 as investment is sustained by accumulated oil revenue.
• We expect inflation to fall to an average of 3.7% 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 15.5% of GDP. It will recover to 26.2% of GDP in 2010, as prices and output rebound.

Monthly review

• Abdulbaset al-Megrahi, the man convicted of the Lockerbie bombing, has been released on compassionate grounds. The decision has upset US-UK relations, and the UK government's role in the decision has been questioned.
• Libya has reneged on an agreement to allow two Swiss nationals to leave Libya. The nationals have been kept in the country since the brief arrest of Colonel Qadhafi's son, Hannibal, in Switzerland in July 2008.
• The government is considering a decree requiring foreign companies in Libya to appoint Libyan nationals as their chief executives.
• The Libyan Investment Authority is seeking to open an office in London.
• Data have been released in August, showing that overall real GDP growth remained strong in 2008 and was particularly strong in non-oil sectors.
• New data have shown that year-on-year money supply growth plummeted in the first two quarters of 2009 compared with 2008 mainly as a result of lower oil prices and that there has been a commensurate drop in inflation.

Source: Country Report

This report covers the following industry codes:
SIC Code: 1
NAICS Code: 11