Since the escalation of violent conflict in March 2015, the economy has deteriorated sharply the estimated contraction amounts to approximately 50 percent cumulatively. The decline in GDP growth is bottoming out in 2018 with an estimated reduction of 2.6 percent compared to 5.9 percent in 2017. Conflict related adverse economic impacts and distortions show equally negative impact for the supply response and demand side, the latter being much driven by reduced household incomes. Employment opportunities have significantly diminished.
Economic prospects in 2018 and beyond will critically depend on rapid improvements of the political and security situation, and ultimately whether an end to the ongoing conflict will allow for rebuilding the economy and social fabric. If violence can be contained by late 2018, GDP is projected to begin to recover in 2019, with double-digit GDP growth. Inflation is like-ly to decline in such a case as supplies will increase. Less conflict might also help to stabilize further the exchange rate and bring back more options for monetary policy. Restoration of more peaceful conditions will allow for resumption of hydrocarbon production, which in turn will help restore government revenues and the balance of payments.