Libya’s Economic Growth Slows Amid Oil Price Volatility

Libya’s Economy Shows Signs of Deceleration

Tripoli, Libya - Libya’s economic growth has slowed down in recent months, reflecting a deceleration in oil production and higher non-hydrocarbon GDP growth rates. According to the country’s authorities, real nonhydrocarbon GDP growth is estimated at around 2.5 percent for the year as a whole.

Fiscal Surplus Expected to Reach 19% of GDP

The country’s overall fiscal surplus is expected to reach approximately 19 percent of GDP, driven primarily by oil revenue which accounts for about 52.4 percent of GDP. However, non-oil revenue has declined by around 1 percentage point of GDP due to reduced tax revenue resulting from new tax law provisions.

Government Spending Expected to Decline

Despite significant increases in the wage bill and capital expenditure, total government spending is expected to decline by 4 percent of GDP, mainly due to a drop in current extra-budgetary expenditure. The authorities plan to approach foreign debtors on a bilateral basis to discuss terms for reimbursement of their debt to Libya, which still amounts to around €600 million.

Inflation Rate Continues to Decline

The country’s inflation rate has continued to decline, with the consumer price index (CPI) expected to remain low due to modest growth in goods supply and increased wage payments. The authorities are working to prepare a new CPI using data from a household survey conducted in 2003.

Strong External Current Account Surplus

Libya’s external current account is expected to show a strong surplus of around 26 percent of GDP, driven by increases in oil exports volume and price. Non-hydrocarbon export growth has remained robust, while imports have grown by about 19 percent due to import liberalization and high import prices.

Official Reserves Reach $24.6 Billion

The country’s official reserves have reached $24.6 billion, equivalent to around 27 months of projected 2005 imports. The authorities plan to use the foreign assets revaluation account at the Central Bank of Libya (CBL) to buy back domestic debt and part of public enterprises’ debt from commercial banks.

Concerns Raised over Debt Buybacks

In a separate development, the CBL has expressed concerns about the government’s plan to buy back additional public enterprises’ debt using the revaluation account, citing unrealized profits. The authorities have also been advised to prioritize comprehensive public enterprises reform plans over debt buybacks.

Medium-Term Outlook Remains Favorable

Overall, Libya’s medium-term outlook remains favorable and does not raise any sustainability concerns.