Country Forecast Libya March 2018 Updater

Country Forecast Libya March 2018 Updater

  • March 2018 •
  • Report ID: 5355284 •
  • Format: PDF


  • A new UN-led initiative to form a unity government and then move towards elections is expected to progress, with major delays, in 2019, following the likely appointment of a powerful Qadhafi-era general, Khalifa Haftar, as commander of the country's armed forces around end-2018.
  • Even following the progress on the UN initiative, insecurity will remain widespread, with local armed groups vying for influence, and Islamic State maintaining a presence around Sirte. Moreover, opposition to Mr Haftar from typically Islamist militias in Tripoli and Misurata will probably lead to a spike in fighting in 2019. However, a growing desire for stability will prevent such militias from gaining widespread support, thus preventing a return to full-scale civil war.
  • Following a revival in oil output in 2017, production should Owing to a poor business environment, Libya is the second-lowest-ranked country both regionally and globally for 2018-22. However, there will be some relative improvement in the economic environment as oil production picks up. Ongoing challenges include insecurity, crippling institutional divisions and a serious shortage of technical expertise.
  • Oil output will rise on average over the forecast period, although it will not reach pre-war levels and will remain subject to intermittent outages owing to security-related disruptions.
  • Fearful of exacerbating social unrest, the Central Bank of Libya, with its large stock of foreign reserves, will continue to operate as a de facto Ministry of Finance until a unified government emerges, prioritising current expenditure on subsidies and salaries over large-scale reconstruction works. The latter will be largely delayed until the final years of the forecast period (2020-22), when a more permanent government should be able to restore a degree of stability.
  • The Economist Intelligence Unit estimates that real GDP expanded in 2017 for the first time since 2012, by 25.6%, as a result of a doubling in oil output. However, growth will slow to an average of about 5% in 2018-19, owing to pent-up import demand, before rising again from 2020 as the non-oil sector begins to recover and capital expenditure rises.
  • Consumer price inflation will remain in double digits in 2018-22 mainly owing to supply-chain disruptions and the monetisation of the fiscal deficits. However, it will ease from an estimated 28.7% in 2017, to an average of 14.3% in 2020-22 as a result of improving security and an easing of currency pressures, in turn lowering import costs. The rise in oil output and foreign reserves since end-2016 should help maintain the currency peg to the IMF's special drawing rights.


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