One of the hardest-hit countries by Ebola, Liberia was still recovering from the 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.
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.
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.
The Liberian Government, under the leadership of President George M. Weah continues to implement its Pro-Poor Agenda for Prosperity and Development (PAPD) despite challenges, especially those brought by the Covid-19 pandemic. The next Presidential and Legislative Elections are to be held in October 2023.
The Senatorial Special Elections held in December 2020 may have provided a glimpse of how competitive the 2023 elections may be. A fragmenting opposition coalition could contribute towards the strengthening of the ruling coalition.
A recent national referendum to reduce the tenure of the President and members of the Parliament didn’t get the required votes. A dual citizenship clause for diaspora-based Liberians was also defeated.
Liberia’s economy is rebounding after contracting for two consecutive years. Real GDP growth is projected at 3.6% in 2021, allowing per capital GDP to increase for the first time since 2016. Nevertheless, poverty is expected to slightly increase as per capita consumption continues to contract, with the growth being driven by export of commodities.
Notwithstanding the rebound in economic activity, inflationary pressures have moderated. The rate of inflation slowed steadily to 7.1% by July 2021 due to a decline in food prices and the CBL’s cautious monetary stance.
Liberia’s fiscal position improved in the first five months of 2021 due to increased revenues and spending consolidation. Total revenues and grants increased to $249.3 million, while total expenditure reached $286.4 million, yielding a fiscal deficit of $37.1 million (1.1% of GDP). With the amended PFM act requiring Liberia to align its fiscal year to the calendar year by 2022, the legislature has approved a special budget to fund fiscal operations from July 1 to December 31, 2021. Total revenues and grants are projected at $429 million (12.7% of GDP) between July 1st and December 31, 2021, with domestic revenue representing 70% of public resources. Total expenditure is projected at $458.2 million (13.6% of GDP, including donor-financed projects), with current expenditure representing 60% of the special budget. The fiscal deficit of the special budget is projected at 0.9% of GDP and is expected to be fully financed by external loans.
Liberia’s current account deficit is expected to narrow in 2021. The recovery in the price of main export commodities, on the back of renewed international demand, has boosted the value of exports and improved the trade balance.
Liberia’s economy is projected to expand by an average of 4.9% in 2022-23. Growth will be driven mainly by the mining sector and external demand. Structural reforms are expected to increase activity in mining, agriculture, and construction. Per capita GDP is expected to return to pre-COVID-19 levels by 2023.
Last Updated: Oct 26, 2021