One of the hardest-hit countries by Ebola, Liberia was recovering from a health crisis that took thousands of lives and devastated the economy when the COVID-19 pandemic started. Despite its abundant natural wealth and favorable geographic location, Liberia is among the world’s poorest countries.
While poor households are heavily concentrated in rural areas, urban poverty also poses a significant challenge. In 2016, more than 2.2 million Liberians were unable to meet their basic food needs, of which almost 1.5 million (68%) resided in rural areas, 1.6 million were below the food-poverty line, and 670,000 lived in extreme poverty. Regional and urban-rural disparities in poverty rates widened in the wake of the Ebola crisis and the collapse of global commodity prices. T
The country is rich in natural resources which include iron ore, diamonds, gold, fertile soil, fishery and forestry. However, the economic potential of these assets remains largely untapped.
Political Update
The peaceful handover of power in January 2018 from one democratically elected administration to another is a turning point in Liberia’s history and presents an opportunity to reinvigorate its development process. The administration of President George M. Weah has reached the half-way mark of its six-year tenure. Next Presidential and Legislative elections will take place in 2023.
All political actors are now bracing themselves for the Senatorial Mid-Term Elections to take place on December 8, 2020. The tenure of 15 out of 30 senators will be expiring and those seeking re-election will have to face the electorates. The political field is expected to be crowded for these elections because it could serve as a litmus test on the 2023 polls. During the December elections, a national referendum to reduce the tenure of the President and members of the House of Representatives from 6 to 5 years and senators from 9 to 7 years will take place. Dual citizenship for diaspora-based Liberians is also included.
Economic Overview
Liberia’s economy, already enduring a challenging domestic and external environment, is now facing the COVID-19 pandemic. The economy contracted by 2.3% in 2019 on the back of weak consumption and output. High inflation, at 27%, eroded purchasing power and consequently welfare. The burgeoning COVID-19 pandemic poses a major threat to the economy. Under the baseline scenario, real GDP is projected to contract by 2.6% in 2020 due to the effects of COVID-19 on output across multiple sectors, especially services and manufacturing, reflecting a combination of precautionary behavioral changes and public policies designed to halt the spread of the disease.
The government’s fiscal position deteriorated significantly in FY2019. The fiscal deficit widened from 4.8% of GDP in FY2018 to 6.1% in FY2019, while the primary deficit rose from 4.2% of GDP to 5.4 %. Revenues failed to meet expectations across all major categories, but shortfall in external grants and nontax revenues were especially acute. Public expenditures rose by about 8% in nominal terms, or about 4 %age points of GDP. Liberia’s total public debt stock reached 52.4% of GDP. In FY2020, fiscal deficit is expected to remain at FY2019 level (6.1 % of GDP) thanks to the large increase in donor financing.
Liberia’s current account deficit narrowed to 22.1% of GDP in 2019 from 23.5% in 2018. The country’s external position is projected to improve over the medium term despite lower prices for all its major export commodities except gold. Meanwhile, the current account deficit is expected to widen from 22.1% of GDP in 2019 to 22.7 % in 2020 before narrowing to 19.7% of GDP by 2022 despite some improvements in the trade balance. The current account deficit will be financed by the net use of IMF credit and capital inflows to the agriculture, mining, and infrastructure sectors as the COVID-19 pandemic subsides.
Over the medium term, a sharp rebound is expected in 2021, supported by efforts to contain the outbreak and structural reforms designed to alleviate constrains on productivity growth and enhance recovery in various sectors. Growth is projected to recover to 4.1% on average during 2021-22. However, a protracted pandemic, characterized by deteriorating global conditions (including global supply, demand, and terms-of-trade shocks), coupled with financial sector vulnerabilities and insufficient progress on structural reforms could disrupt economic activity further and lead to sharper contraction in 2020, followed by slower recovery in 2021.
Last Updated: Oct 16, 2020
