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Overview

The delay of national elections originally scheduled for December 2021, with no agreement on the new dates nor on the legal and constitutional basis for these proposed elections, has brought a return to political division in Libya. Despite the progress made in 2021 towards ending the decade- long conflict and reunifying competing institutions, the confirmation of a new cabinet by the eastern-based House of Representatives in February 2022 has returned Libya to a state of institutional division with two parallel government administrations in the East and West and negative implications for security, policy making, and economic recovery.

Thus, the significant economic rebound, registered in 2021, could be hindered by new political and security tensions. Oil production in 2021 averaged 1.2 million barrels per day, recovering from 0.4 million barrel per day in 2020. Real GDP grew by 31.4%, compared to a 29.8% contraction in 2020. Improving oil production and soaring international oil prices, coupled with an exchange rate devaluation in January 2021, have turned a fiscal deficit of 32.7% of GDP in 2020 into a surplus of 10.3% in 2021. Trade balance deficits have reversed from 4% in 2020 to a surplus of 47% of GDP in 2021. However, the political tensions and deteriorating security conditions (found around major oil fields and export terminals at the beginning of 2022) have led to a drop in oil production of 0.5 million barrels per day, resulting in an estimated loss of US$50–70 million a day.

Household welfare has continued to deteriorate, due to increasing inflation, compounded with already deteriorating livelihoods. Prices of essential goods rose during 2021 and accelerated in the second half of the year. Inflation rate reached 2.8% in 2021, more than twice as high as in 2020 (1.1%). The recent Russia-Ukraine crisis and potential short-term supply disruption may put additional inflationary pressure on prices of essential goods, such as wheat, barley, maize, and corn, further increasing food insecurity.            

Political instability in Libya and the ongoing Ukraine-Russia crisis are likely to continue to slow down Libya’s economic recovery. The country will benefit from soaring global oil prices, translating into higher fiscal revenues and greater inflows of hard currency. This will positively impact its growth and its fiscal and external balances. Positive economic performances, however, depend on funds for the maintenance of oil facilities and for stabilizing oil production. In contrast, other shocks to the global economy, or shocks to global commodity prices, would adversely affect Libya’s economic activity and households’ welfare.  

Last Updated: May 31, 2022

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Libya: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments
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Ebrahim Al-Harazi
+1 (202) 855 1565