Country Report Libya November 2009


Outlook for 2010-11

  • 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's most likely successor is his son, Saif al-Islam Qadhafi, a reformer who was appointed as general co-ordinator of the Popular Social Command with powers over parliament and the executive in October 2009.
  • 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 rise to 4.6% in 2010 owing to raised OPEC output quotas, strong non-oil sector growth and government investment, with a smaller increase to 4.7% in 2011 as the global recovery slows.
  • We expect inflation to rise to an average of 5.3% over the forecast period, as international oil and non-oil commodity prices, particularly for food, rise.
  • The current account will record a surplus of 25% of GDP in 2010-compared with an estimated 15% in 2009-although this will fall to 18% in 2011 as a result of lower average annual oil prices.

Monthly review

  • Foreign relations have continued to be sullied by a series of disagreements, many of which are associated with the period when Libya was excluded from the international community.
  • Libya has come close to finalising a US$1bn arms deal that includes the purchase of 20 fighter jets from Russia.
  • Shokri Ghanem has been reinstated as chairman of the National Oil Corporation, having resigned only one month previously.
  • The government has announced plans to build two major "energy cities" including hydrocarbons infrastructure and tourism facilities. The cities are expected to add up to 32,000 jobs.
  • Government deposits in the banking system have slowed and negative domestic credit has contracted, but financial intermediation within the banking system remains poor, although reforms are planned.
  • Consumer price inflation continued to slow during the third quarter of 2009 as imported food prices and housing costs have stabilised.
© 2009 The Economist lntelligence Unit Ltd. All rights reserved
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