The political situation remains stable as preparations for next year’s Presidential and Legislative elections begin to gather momentum as the date of the elections has been set to October 10, 2023. The political landscape remains dynamic with the opposition appearing to be more divided while the actors within the ruling coalition seem to be more united. Meanwhile, it has also been recently announced that the National Population and Housing Census will take place from October 24 to November 7, 2022. The last one took place 14 years ago, in 2008.
Two key pieces of legislation have recently been enacted and widely welcomed. The first is an amendment to the Liberia Anti-corruption law that includes granting the Liberia Anti-Corruption Commission (LACC) the autonomy to prosecute suspects and the introduction of a more transparent and inclusive process of appointing new LACC leadership. The second is the enactment of a new Dual Citizenship Law allowing dual citizens to legally own land and engage in businesses under the “Liberianization Policy,” which restricted certain business ventures to Liberians only. This is likely to spur an increase in investments from diaspora Liberians who have already been playing a huge role in the economy. Personal remittances accounted for 11% of GDP in 2020. The new law restricts dual citizens from occupying elective positions and from being governor of the Central Bank, Finance and Defense ministers.
Liberia’s economy experienced strong growth in 2021. After contracting by 3.0% in 2020 due to the COVID-19 pandemic, growth recovered to 5.0% in 2021. The rebound was driven by improved external demand, higher prices for Liberia’s main exports, and the resumption of normal domestic activity. Meanwhile, growth slowed in the first half of 2022, even if mining and construction continued to perform well. In agriculture, rubber and cocoa production dipped by 13.5% and 27%, year-on-year, respectively. In the industrial sector, iron ore, gold, and cement production all increased, reflecting firmer international prices and an uptick in construction activity. However, services growth fell, as reflected in the decline in beverages and electricity production.
Despite higher global fuel and food prices, inflation remained contained in 2021 and during the first half of 2022. Annual average inflation declined to 7.9% in 2021, down from 17.4% in 2020 and has moderated further to 6.5% in July 2022. As inflationary pressures ease, the Central Bank of Liberia (CBL) has eased its stance on policy by reducing the policy rate by 500 basis points to 15% in August 2022. However, the policy remains well above inflation.
The government’s fiscal deficit and public debt ratio improved in 2021. Liberia’s fiscal position improved in 2021, thanks to domestic revenue gains and spending consolidation. The gains in revenue were led by taxes on incomes and profits and international trade while efforts to contain the wage bill continued. As a result, the public debt declined from 55.8% of GDP in 2020 to 53.3% in 2021. During the first seven months of 2022, the government has kept its expenditures within the limits of revenue collected.
Liberia’s current account deficit worsened in 2021, driven by trade dynamics. The current account deficit widened from 16.3% of GDP in 2020 to 17.6% of GDP in 2021, mainly due to a worsening trade deficit. The deficit was financed mainly by foreign direct investment (7.3% of GDP) and capital grants. In August 2021, Liberia benefited from a new Special Drawing Rights (SDR) allocation from the International Monetary Fund of SDR 247.7 million (approximately $350 million), equivalent to 7.3% of GDP.
Conditions in Liberia’s financial sector remain challenging. The widespread between interest rates for commercial lending (12%) and for deposits (2%) suggests considerable inefficiency in the financial sector.
Growth is expected to slow to 3.7% in 2022, reflecting increased global uncertainties and commodity price shock, but reach an average of 5.2% over 2023-24. Beyond 2022, growth is underpinned by significant tailwinds for mining, the government’s planned scale-up of public investment, and the implementation of structural reforms including in key enabling sectors (such as energy, trade, transportation, and financial services). Inflation is projected to remain low and stable, averaging 7.2% per year in 2022-24. The fiscal deficit is projected to widen to 4.3% in 2022 but improve in the medium term with reforms aimed at improving domestic resource mobilization and consolidating expenditures. Notably, the lingering effects of the war in Ukraine and the 2023 elections could pose significant risks to the outlook.
Last Updated: Sep 30, 2022