Political Overview
The National Elections Commission (NEC) has been accelerating efforts to undertake activities leading to the conduct of October 2023 Presidential and Legislative elections. President George M. Weah committed his administration to ensuring a free, fair, and peaceful election. Despite, his plea, the country witnessed isolated cases of violence. The NEC commenced biometric voter registration on March 20, 2023, which is expected to minimize double registration
Meanwhile, the National Population and Housing Census preliminary results have been released and put the population at 5.2 million. The final results will be out in July 2023, and it is unlikely that these final results will be used to carry out constituency demarcation as the NEC has already started voter registration.
Two new pieces of legislation have been widely welcomed. The first is an amendment to the Liberia Anti-corruption law. Key changes to the law include 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. The law allows dual citizens to legally own land and engage in businesses under the “Liberianization Policy.” This is likely to spur an increase in investments from diaspora Liberians. Personal remittances accounted for 11% of the country’s GDP in 2020. The new law also grants Liberian citizenship to individuals with one Liberian parent.
Economic Overview
Liberia’s economy expanded by 4.8 % in 2022 despite global headwinds from the war on Ukraine, high global inflation, and depressed demand in advanced economies. The expansion was driven by mining and agriculture. Growth in the agricultural sector accelerated to 5.9%, from 3.3% in 2021, on the back of increased rice and cassava production. Industrial output grew by 10.4% in 2022 largely driven by increased gold production. Growth in services slowed to 2.8%, from 3.0% in 2021, reflecting a slowdown in construction services and hospitality.
Despite the pressure from global fuel and food prices, inflation remained contained in 2022. Annual average inflation slowed to 7.6% in 2022, down from 7.8% in 2021. Food prices declined by 1.6 % thanks to relatively good agriculture harvests, whereas non-food inflation reached 10.6%, primarily due to energy prices. The Central Bank of Liberia kept reserve requirements unchanged in 2022.
The government’s fiscal position worsened in 2022. The deficit is estimated to have risen to 6.9% of GDP in 2022, up from 2.4% in 2021. This was partly a reflection of the change in IDA lending policy (specifically the decline in grants, which were accounted for “above the line”, by 2.9% age points of GDP) and lower-than-expected royalties from iron ore due to delayed expansion of the Arcelor Mittal mining project, expenditure overruns on goods and services, transfers, and subsidies. With a debt-to-GDP ratio of 55.4 Liberia is assessed to be at moderate risk of external debt distress and high risk of overall debt distress.
Liberia's current account balance improved in 2022, thanks to booming gold exports. Despite higher global prices for food and fuel (of which Liberia is a net importer), the current account deficit narrowed to 15.7% of GDP, down from 17.8% in 2021. The trade balance improved from a deficit of 13.1% of GDP in 2021 to 9.8% driven largely by higher volumes and export prices of gold and a decline in food imports during the year. Despite robust foreign direct investment (7.4% of GDP in 2022), the financing of the current account deficit was challenging as disbursements in project grants declined net disbursement of loans decreased. The overall balance of payment showed a deficit of 1.1% of GDP. The reserve coverage declined to 3.5 months of import cover in 2022, from 4.0 months in 2021. The Liberian dollar appreciated by 8.0% against the dollar between 2021 and 2022.
The monetary policy stance has remained appropriately tight in 2022 and responsive to overall conditions. The Central Bank of Liberia (CBL) kept reserve requirements unchanged in 2022. The policy rate was held at 20% from January to July before being cut to 15% in August. Commercial banks were typically in compliance with prudential capital and liquidity requirements in 2022. By December 2022, the share of non-performing loans (NPL) fell from 22.9% to 16.4%.
Growth is expected to taper off to 4.3 % in 2023, reflecting increased global uncertainties and commodity price shock, before reaching an average of 5.6% over 2024-25 as the country benefits from tailwinds for mining and structural reforms in sectors such as energy, trade, transportation, and financial services. Inflation is projected to increase slightly to 7.8% in 2023 and moderate gradually to 5.5% by 2025. The overall fiscal deficit is projected to narrow to 4.9% of GDP in 2023 and further to under 3.5% in the medium term as the authorities strengthen expenditure controls and improve revenue mobilization.
Last Updated: Mar 30, 2023
