Libya’s Economic Outlook- April 2017

Hit by the ongoing conflict, the Libyan economy continued to suffer from recession in 2016. It is estimated that GDP lost half of its pre-revolution level. Budget revenues and exports proceeds reached the lowest amounts on record because of low oil production and prices. Consequently, the twin deficits remained high. Real incomes eroded, exacerbated by unparalleled high inflation. The conflict has also hit the population hard. Around 1.3 million people have no access to life-saving health care services and resources.

The lengthy conflict is taking a heavy toll on the Libyan economy and the well-being of the population. Obstructed by the conflict, production of oil, the main source of income in Libya, has been steadily declining over the last 4 years to reach around 0.38 million barrel per day (bpd) in 2016, which is less than 1/4 of pre-revolution levels. As a result, the Libyan economy shrank by an estimated 2.5% in 2016, with estimated real GDP falling to less than half of its pre-revolution level.

The economic outlook assumes that a new functioning government is endorsed this year. In this context, the dynamics in the hydrocarbon sector triggered during the last quarter of 2016 is expected to continue, translating into higher production of oil, which is projected to progressively reach 1 million bpd by end-2017, still rep-resenting only two thirds of potential. On this basis, GDP is projected to increase by 40%. Although improving, the twin deficits will remain, as revenues from oil will not be sufficient to cover high budget expenditures and consumption-driven imports. This should keep the budget deficit at about 18.8% of GDP and the current account deficit at 15.3% of GDP in 2017.